The Final Countdown: Things Every Employer Should Consider Before The New FLSA Regulations Take Effect In December

Transcription

1 Ask Your Employment Lawyer: Real Time Answers to Issues All Employers Should Consider The Final Countdown: Things Every Employer Should Consider Before The New FLSA Regulations Take Effect In December Online Webinar Jason E. Reisman Mark Blondman

2 Disclaimer 2016, Blank Rome LLP. Notice: The purpose of this update is to identify select developments that may be of interest. The information contained herein is abridged and summarized from various sources, the accuracy and completeness of which cannot be assured. This update should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.

3 Agenda Background New OT Exemption Rules Impact of New Rules What Employers Can & Should Do (Now) 3

4 Some Basic FLSAQuestions That Must Be Considered Who is entitled to MW and OT in this country? General Rule: everyone Exceptions: exemptions Note: everyone includes only employees Those you suffer or permit to work not independent contractors What does exempt mean? No OT (or MW) no matter how much work is done Most popular exemptions? White Collar Exemptions EAP, o/s sales, computer 4

5 DOL snew Regulations White Collar Exemptions Background: 3/2014 Obama directive to modernize and streamline 7/6/15 DOL publishes proposed new regs 60-day comment period Almost 300,000 public comments submitted 12/1/16 Final Rule effective Will touch almost every for-profit, nonprofit, and gov t/public employer DOL says affects 4.2 million workers Headline just increasing the salary amount right? Not exactly but no change to duties tests yippee! 5

6 Remember New FLSARegulations Deal with White Collar Exemptions Executive (supervise 2+ FTEs, hire/fire) Administrative ( independent judgment & discretion ) Professional (specialized degree) Outside Sales (really, outside ) Computer? (system analyst/programmer/software engineer) Highly compensated? (office/non-manual + 1 duty of EAP) 6

7 To Be An Exempt White Collar Employee All3 of the following must be satisfied: Salary > $455/week (except as below) Paid on a salary basis Perform the primary duty required Note:salary level and basis do not apply to outside sales, doctors, lawyers, teachers, certain computer professionals paid higher hourly rate 7

8 DOLNew Regs Minimum Salary Amount For Exec/Admin/Some Prof l Employees: $455/wk($23,660/yr) $913/wk($47,476/yr) 40th % of FT salaried in lowest wage Census region (currently, the South) For highly compensated employees: $100,000/yr $130,004/yr Must include minimum salary $455/wk $913/wk 90th % of FT salaried nationally Note: 2015 poverty level for family of 4: $24,036/yr Is that it? No, there s more 8

9 New Regs Automatic Updates to Salary Minimum Auto-updates every 3 years, beginning 1/1/20 (40 th %) Expected to exceed $51,000 in 2020 Will skew salary level because it: includes EEsnot covered by rule (for example, federal EEs); and includes EEs not subject to salary level test (e.g., drs, lawyers, teachers). Will cause upward shift because: current exempt EEs may be given raises to avoid salary compression; those re-classified to salary non-exempt may have increased earnings due to OT pay; and those reclassified to hourly will be excluded from data. 9

10 New Regs Limited Use of Bonuses/Commissions Up to 10% of minimum salary can be satisfied with nondiscretionary bonuses, incentive pay, and commissions Non-discretionary? 10% = $4, (quarterly = $1,186.90) Must be paid quarterly or more frequently Catch-up allowed on quarterly basis Essentially equates to a guaranteed bonus if not tracking time What if employee quits/is fired mid-quarter? 10

11 What to Do Path Forward The Dilemma: To raise or not to raise All currently exempt EEsearning less than $47,500 Salary Increase vs. Reclassification Maintain the exemption or not Giving raises = potentially significant financial impact Reclassification means 11

12 Impact: Tons of Newly Non-Exempt Workers When employees get reclassified as non-exempt : Morale issues (feel like demoted, stigmatized) Lose perks and benefits of being exempt employee Less flexibility and more restrictions Enter a whole new world of timekeeping and administrative burdens Those not losing the exemption (already make > $47,500): Longer hours More duties/responsibilities Salary compression 12

13 Prepare NOW for the New Regs Identify vulnerable job classifications (< $47,476) Evaluate paths forward pay raises vs. reclassification If reclassifying, that old self-audit concept can be valuable ID amount of OT hours worked by those in danger zone Then consider reverse-engineering the comp package to create an hourly rate or salary that, when accounting for OT costs, is about the same as when exempt P.S. Maybe a broader audit questionable exempt roles? Are other exempt EEs actually performing required duties? Don t waste this opportunity! Involve legal counsel protect discussion/evaluation? 13

14 No Changes to Common Myths Still not about being paid a salary salaried does not mean exempt Still not about job title Still not about written job description Still not about how everyone else does it Still required to pay for OT even if not authorized Still cannot waive rights to OT (or MW) Still no comp time for private employers 14

15 New Regs Litigation Trigger? Beware: enormous number of vulnerable positions (i.e., under $47,476) If not, reclassify or raise salary, begging to be sued If reclassify, many/most/all new non-exempt workers are uneasy with Punching a clock Managing their hours and work Prediction: off-the-clock claims will abound Remember:almost every FLSAsuit is a class ( collective ) action 15

16 Questions? 16