New Overtime Rules & Pay Scenarios › uploads › ... · Final Rules: Timeline JULY ‘15...

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New Overtime Rules & Pay Scenarios

Do I have to pay my employees for that?

provided with the understanding that ADP is not rendering legal advice or other professional services.

Today’s Presenter

Aldor H. Delp

DVP & GM for ADP Resource

Aldor has held senior leadership roles in various business

units, including Dir. of Business Development, Dir. of Market

Intelligence, Implementation Executive, & GM of HR

Solutions.

Welcome!

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The information is provided “as is” without any expressed or implied warranty, is based on generally accepted HR practices and is advisory in nature.

This content provides a high level overview and practical information concerning the subject matter covered and is provided with the understanding that neither the publisher nor the writers are rendering legal advice or other professional services.

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Agenda

• FLSA & Final Overtime Rules

• Contractor vs. Employee

• Unauthorized Work

• Training & Working Interviews

• Meal & Rest Periods

• Reporting & Waiting Time

• Travel Time

FLSA & Final Overtime Rules

Federal Minimum Wage & Overtime

Minimum wage:

$7.25 per hour

State and local rates may be higher

Overtime:

1.5x regular rate for hours worked over 40

Some states require daily overtime

Exempt vs. Non-Exempt Status

DOL Fact Sheet 17A: http://www.dol.gov/whd/overtime/fs17a_overview.pdf

Non-Exempt Exempt

• Paid for all hours worked

• Entitled to overtime

• Typically paid on hourly basis

• Paid a set salary each week

• Not entitled to overtime

• Must meet job duties tests

Common Exemption Tests Administrative, Professional, & Executive

Salary-basis test

Paid a fixed salary each

pay period

Salary-level test

Earns at least $455/week

(until Dec. 1, 2016)

Duties test

Job duties meet

established criteria

Final Rules: Timeline

JULY ‘15 SEPT. ‘15 MAR ‘16 MAY ‘16 DEC. ‘16

Proposed rules

published

Public comment

period ends Proposal submitted

to the OMB

Final rules published

on May 18, 2016 Final rules effective

December 1, 2016

The DOL reviewed over

250,000 public comments

Review your options

Prepare to comply

Communicate with employees

Final Rules: Minimum Salary

Administrative, Executive, Professional Highly Compensated Employee

Current (Since 2004) Effective Dec. 1, 2016

$23,660/year

($455/week)

$47,476/year

($913/week)

$100,000/year

$134,004/year

Bonuses, Commissions, & Incentive Pay

Nondiscretionary bonuses,

commissions & incentive pay can be

used to satisfy 10% of the minimum

Announced in advance, tied to

reaching agreed upon performance

metrics

Already permitted for highly

compensated employee exemption

Salary Adjustments Every 3 Years

Administrative, Professional, & Executive:

40th percentile of earnings for full-time salaried

workers in lowest wage region

Highly Compensated Employee:

90th percentile of earnings for full-time salaried

workers nationally

Raise exempt

employees’ salaries

to meet the new

requirement

What You Can Do to Prepare

Reclassify exempt

employees as non-

exempt, making them

overtime eligible

Option 1: Raise Wages

• Best for employees who:

– Salary is approaching new minimum

– Regularly work over 40 hours/week

• Considerations:

– Review job duties to ensure

exemption still applies

– Plan for automatic adjustments

Option 2: Reclassify Exempt Employees

Average 40 hours/week Average 40+ hours/week

Account for overtime premium

$715 weekly salary

[40 hours+ 10 overtime hours x 1.5 ]

= $13 hourly rate

40 hours = $17.88 hour

Hourly Rate = Weekly Salary

40 hours

Example: Example:

Communicating Changes to Employees

Let employees know you’re evaluating the rules

Provide written notice of pay changes

Be sensitive to reclassified employees

Other Considerations

Train supervisors on the final rules

Train reclassified employees on timekeeping

Avoid policies prohibiting pay discussions

Contractor vs. Employee

An independent contractor is

self-employed and offers his or

her services to the general public

under terms specified in a

contract.

DOL Economic Realities Test

Integral Part of Business

Is work performed integral

to the business?

Opportunity for

Profit & Loss

Does the worker have an

opportunity for profit and

Investment in

Facilities & Equipment

Does worker make

investments?

How does their investment

compare to the company’s?

DOL Economic Realities Test (cont’d)

Permanency of

Relationship

How long is the

worker going to work

with the employer?

Worker’s Skill & Initiative

Is the worker in open

competition with others?

Degree & Nature

of Control

How is the worker paid?

Who sets the hours?

Who determines how

the work is done?

Scenario

A firm hires Joe for a 3 month

project. Joe is paid a set

salary each week, reports to

the office daily, and uses the

company's computers. Is Joe

an independent contractor or

an employee?

Solution

Permanency of

Relationship

Works for firm

indefinitely

Degree & Nature

of Control

Reports to the office

daily, attends meetings,

paid a set salary each

Investment in

Facilities &

Equipment

Uses company

computers and

workspace

Integral Part of

Business

Job is a key aspect of

the business

Unauthorized Work

Scenario

Cindy’s Coffee Shop has a

policy requiring employees to

get authorization to work

overtime. Linda repeatedly

works unauthorized overtime.

Can Cindy withhold overtime

Solution

Even though Linda violated the policy, she’s still entitled to

overtime pay. In no case can an employer withhold pay.

Scenario

Joan noticed that several

non-exempt administrative

assistants are replying to her

emails after they have

punched out. Do these

employees need to be paid

for this time?

Solution

Yes, non-exempt employees must be paid for all hours

worked. Make sure employees are aware that that they are

responsible for reporting after-hours work.

Working Interviews & Training

Scenario

Jaime wants to use “working

interviews” to assess

candidates’ skills before

hiring them. Is she required

to pay candidates for the time

spent working?

Solution

Yes. Jaime should pay them at least the minimum wage

per hour, withhold taxes, and comply with all applicable

employment laws.

Scenario

Michael requires all staff to

participate in sexual

harassment training. The

training is scheduled to take

place before the restaurant

opens. Does Michael have to

pay employees for this time?

Solution

Yes. Employees must be paid for the time since it is a

mandatory training. According to the FLSA, training time

must be paid unless it meets very specific criteria.

DOL Training Criteria

Attendance is voluntary and outside of the employee’s

regular working hours;

It’s not directly related to the employee’s job; and

The employee does not perform any productive work

during the training.

Meal & Rest Periods

Overview

Rest breaks lasting 20 minutes or less must be paid

Bona fide meal periods can be unpaid as long as

certain criteria are met

Scenario

Violet gives employees a 10-

minute break 2x per day. Two

employees consistently

extend those breaks to 20

minutes without permission.

Does Violet have to pay them

for the extra time?

Solution

Yes. Generally, when employees take unauthorized

extensions of rest breaks, the time must be paid if the rest

period lasts 20 minutes or less and employees weren’t

previously informed that such extensions are prohibited.

Scenario

Josh offers employees a 30-

minute lunch period. One of

his employees was on her

lunch break when Josh

asked her to help a client.

Does Josh have to pay her

for the full meal period?

Solution

Meal periods must be at least 30 minutes without

interruption and the employee must be fully relieved of all

duties. A meal period is subject to pay if it’s interrupted

for the company’s benefit, or the employee is not free to

use the time as they wish.

Reporting & Waiting Time

Scenario

Because of inclement

weather, Melanie sent her

roofing crew home before

they started their shift. Does

Melanie have to pay them a

certain number of hours

since they showed up for

Solution

There is no federal report-in pay requirement. However,

those employees that report to work and must wait until a

decision is made must be paid for the time spent

waiting.

Scenario

Roger owns a welding

company. Jim’s welding tool

breaks and he is unable to

work while waiting for the

repairs. Does Roger have to

pay Jim for the time he spent

waiting?

Solution

Yes. Jim is entitled to pay. Time spent waiting can be unpaid

only if the employee:

• Is completely relieved from duty

• Can use the time for their own purposes

• Is told in advance that they can leave

• Is told what time to report back

Travel Time

Scenario

Elizabeth asks two

employees to attend a

seminar two hours away by

car. The travel will take place

during their normal work

hours. Does she have to pay

the employees for their travel

Solution

Yes. If an employee regularly works at a fixed location in

one city but is given a special one-day assignment in

another city, the time spent traveling must be paid.

Scenario

Abby asks Karen to take an

overnight business trip.

Karen’s normal work hours

are 8AM-5PM Mon.-Fri. Her

flight is scheduled for a

Sunday. Does Abby have to

pay Karen for the time spent

on the flight?

Solution

Pay is required for the time that cuts across the

employee's regular working hours. Travel to and from the

hotel and airport must also be paid if it falls during the

employee’s normal work hours.

Key Takeaways | Q&A

Takeaways

Ensure workers are properly classified

Prepare now for DOL final rules

Pay non-exempt employees for all hours worked

Establish an accurate and reliable timekeeping process

Maintain records of all hours worked

Thank you for attending! Visit ADP

Booth 409 ADP’s New Overtime Rules eBook

http://sbshrs.adpinfo.com/flsa

DOL Fact Sheets - www.dol.gov/whd/overtime/fact_sheets.htm

ADP® Time & Attendance – www.adp.com/smallbusiness

New Overtime Rules & Pay Scenarios › uploads › ... · Final Rules: Timeline JULY ‘15...

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