FLSA Update: The Certainty of Change

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FLSA Update: The Certainty of ChangeAugust 2019 Free Trial: compliancehr.com/freetrial


Lori BrownCEO, ComplianceHR

[email protected] @labrown1419

• Former Littler Shareholder

• Former General Counsel / HR Chief of Global Security Organization

• Career Compliance Geek

Follow Us on Twitter: @Compliance_HR

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1. Q & A Box on your screen (questions are confidential – visible to presenters only)

2. E-mail me at [email protected] –monitored throughout today’s presentation (attendees will not be mentioned by name or company)

3. E-mail Tammy at [email protected]

Answering Your Questions

Address federal & state employment law requirements: Compliancehr.com/freetrial


1. Full slide presentation (pdf format)2. Link to recorded audio presentation3. CLE 4. SPHR/PHR and SHRM certifications

(pending approval)

What You’ll Receive

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Objectives for Today’s Session:

I. FLSA OverviewII. DOL Shakeup – Who’s Who and what it all

means…………..III. Overtime: What’s the Latest? IV. Preparing for Upcoming ChangesV. Ensuring Compliance through Navigator OT

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The FLSA requires employers to pay non-exempt employees:

At least the minimum wage for all hours worked

Overtime for all hours worked over 40 in a week at 1.5 times the employee’s regular rate of pay

Employers also must maintain accurate and complete time and payroll records

FLSA Basics

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The FLSA is highly technical – this stuff is complicated!

DOL estimates that 70% of employers are not in full compliance

To comply, you need to understand:Who is exempt and non exempt? When are employees working? How to calculate overtime pay

rate?

FLSA Compliance can be Complicated!

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Exempt or Non Exempt: That is the Question While most employees are eligible for

overtime pay, some employee are “exempt” from the FLSA overtime requirements

The most common exemptions are for “white collar” workers – executive, administrative, professional, outside sales, and computer employees

To be considered exempt, employees must generally satisfy three tests.

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1. Salary-level test

Currently, employers must pay employees at

least $455 per week (the minimum salary

requirement) to qualify for the executive,

administrative, and professional employee

exemptions.

2. Salary-basis

testWith very limited exceptions, the

employer must pay employees their full

salary in any week they perform work,

regardless of the quality or quantity of

the work.

3. Duties test

To qualify for an executive, administrative

or professional exemption an employee

must meet specific duties tests.


Tammy McCutchenVP Strategy, ComplianceHR

[email protected] @tdmccutchen

• Littler Principal

• Former Administrator, US-DOL Wage & Hour Division and author of 2004 revisions to the overtime regulations

• Leading authority on federal and state wage and hour laws

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Alexander Acosta

Secretary of LaborMusical Chairs

Patrick Pizzella Eugene Scalia

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Bryan Jarret

Changes at the Wage & Hour Division

Keith Sonderling Cheryl Stanton

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What do These Changes Mean?

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What Do These Changes Mean?

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The New Overtime Rules: Coming Soon

10% of minimum may be incentive pay

$147,414 annual total for highly compensated employees, with $35,309 guaranteed salary

Future increases not automatic

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Overtime Exemptions -Comments

116,298 comments 115,436 (99.3%) are

identical, asking DOL to set the minimum salary at $51,000

Of remaining 862 comments, only 201 attached letters that DOL will need to review individually

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Up to 10% of the minimum salary level may be satisfied with non-discretionary bonuses, commissions and other incentive pay that are paid annually or more frequently.

The 10% Rule: Be Careful!

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Let’s do the math:$679 – 10% = $611.10 weekly salary

plus$35,308 x 10% = $3,530.90

bonuses/commission paid during the year

What happens if the annual bonus is short?

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What Can You Count Towards the 10%

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Counted towards the 10% All commissions Non-discretionary bonuses and

incentive pay Bonuses based on individual

performance, productivity or hours worked

Bonuses based on company performance

Safety bonuses Retention bonuses

Not counted towards the 10% Service awards

Employee-of-the-month awards

Spot bonuses/prizes

Holiday bonuses

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Highly Compensated Level

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$100,000

$147,414

Current Coming in 2020

$100,000

$147,414

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Compliance will take more time than you anticipate

DOL may give us only a few months to come into compliance

Preparing to comply based on the DOL’s proposed rule will not be a waste of your time

Why Should I Prepare Now?

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Preparing for ChangeHere we go again!

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Why Do We Care?

The Cost of Non-Compliance

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Minimum salary level around $37,000 Bonus will count towards at least 10% of the

minimum salary level, and maybe more Highly compensated level higher than

$100,000 but less than $147,000 No automatic increases Final rule published shortly after Labor Day Lightning-fast effective date of 90 to 120 days

Tammy’s Predictions

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Increase Salary versus Reclassification Determining who to reclassify and

implementing reclassification can take up to six months, and DOL may not give us that much time

Don’t Wait, Start Now

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The Key Decision


• Any new rule is also an opportunity for employers to correct exempt classification errors

• Do the job duties performed by all of your employees meet the requirements for exemption?

New Rule as Opportunity

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• Pull salary and incentive pay data for all employees earning below the minimum

• Calculate the cost of increasing salary to the minimum

• Calculate the cost of overtime: (Weekly salary / 40) * 1.5 *

expected overtime hours• Consider a cost-neutral solution Weekly Salary / (40 + (OT Hours x

1.5))

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The Reclassification Decision: Salary

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The Reclassification Decision: Duties

Do all your exempt employees meet the duties tests for exemption?

Rare opportunity to correct classification issues

Reduced risk of triggering litigation Reclassified based on job duties should

fly under the radar


• Review HRIS data• Review documents• Conduct interviews• Research and apply the law

Job Duty Review Process: The Manual Option

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Job Duty Review Process: An Easier Way

•Complete a questionnaire•Get an answer

• Complete a questionnaire• Get an answer

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Exempt v. Non Exempt: Navigator OT - The Smart Solution

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1. Compensation Plans2. Incentive Pay3. Benefits4. Timekeeping and Payroll5. Wage and hour Policies 6. Communication Plan7. Training

Reclassification, Step-By-Step

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Compliance Made Easy….Why Wait?

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Documents

FLSA Update: The Certainty of Change