Raising the Overtime Pay Threshold: An Overview of New Federal Requirements for Employers

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1 Raising the Overtime Pay Threshold: An Overview of New Federal Requirements for Employers Michael B. Glomb, Partner Feldesman Tucker Leifer Fidell LLP August 9, 2016

2 MICHAEL B. GLOMB Partner at Feldesman Tucker Leifer Fidell LLP specializing in general corporate, income tax exemption, grants law, and fraud and abuse matters. Teaches Healthcare Corporate Compliance and Federal Income Tax Exemption in the Department of Health Policy at The George Washington University School of Public Health and Health Services Over three decades of experience advising community-based organizations on a broad range of employment-related legal matters 2

3 DISCLAIMER This training has been prepared by the attorneys of Feldesman Tucker Leifer Fidell LLP. The opinions expressed in these materials are solely their views and not necessarily the views of the National Council for Behavioral Health. The materials are being issued with the understanding that the authors are not engaged in rendering legal or other professional services. If legal assistance or other expert assistance is required, the services of a competent professional should be sought. 3

4 AGENDA FLSA overtime requirements Key terms Exemptions New definition of salary basis Coping with the new threshold 4

5 BASIC FLSA REQUIREMENTS Pay minimum wage currently $7.25/hr (FEDERAL) Pay 1.5 times the regular rate of pay for more than 40 hours worked in a workweek But note that more stringent state/local laws will prevail over federal requirements 5

6 Regular rate of pay KEY FLSA TERMS all remuneration for employment, except OT, weekend and holiday differentials, discretionary bonuses, gifts, etc. Workweek fixed and regularly recurring period of 168 hours 7 consecutive 24-hour periods Hours worked includes all time employee is required to be on the employer s premises, on duty, or at a prescribed workplace incudes suffer or permit time 6

7 EXEMPTIONS FROM FLSA OVERTIME PAY Executive Administrative Professional Computer professionals Highly compensated employees 7

8 EAP EXEMPTIONS Executive, Administrative, Professional (EAP) Exemptions Duties test Paid on a salary basis Minimum salary requirement THIS IS WHERE THE NEW RULE APPLIES 8

9 Executive EAP DUTIES TEST Primary duty of managing the enterprise or a recognized department or subdivision Customarily and regularly directs work of two or more other full-time employees, or equivalent Has authority to hire or fire, or recommendations are given particular weight 9

10 EAP DUTIES TEST Administrative Performs office or non-manual work directly related to the management or general operations of the employer or employer s customers Primary duty includes the exercise of discretion and independent judgment with respect to significant matters 10

11 EAP DUTIES TEST Learned Professionals Primary duty involves performance of duties requiring Knowledge of an advanced type, primarily intellectual in character, consistent exercise of discretion and judgment In a field of science or learning Acquired through a prolonged course of specialized intellectual instruction e.g. physicians, RNs Note: physicians and residents are exempt from the salary basis test 11

12 Computer Professionals EAP DUTIES TEST Work consists of design, documentation, testing, creation, or modification of computer systems or programs Involves design, documentation, testing, creation, or modification of computer programs related to machine pope rating systems Work combines above duties requiring same level of skills 12

13 EAP DUTIES TEST Highly Compensated Employees (HCE) Performs non-manual work Performs any one or more of the duties required for the EAP exemptions Compensated at least $100,000 per year (current) 13

14 EAP SALARY BASIS Salary basis Regularly receives a pre-determined amount weekly or less frequently for all or part of the compensation Amount does not vary based on quantity/quality of work performed Paid at a minimum compensation level 14

15 EAP MINIMUM COMPENSATION $913 per week/$47,476 annually (beginning December 1, 2016) Current amount is $455/$23,660 $134,004 annually for HCE Regular bonuses can count for up to 10% Minimum amount will be adjusted every three years first adjustment in 2020 Estimated to go to $984/$51,168 and to $147,524 for HCE in 2020 Potential additional record keeping obligations 15

16 COPING WITH THE NEW THRESHOLD Pay OT (as authorized by employer) No suffer or permit time No averaging over pay period Generally, no compensatory time No docking for poor performance or partial day absences OT pay is not waivable 16

17 COPING WITH THE NEW THRESHOLD Reduce regularly scheduled hours to 40 or fewer and monitor hours Reduce base pay to adjust for OT premium Raise pay to above OT threshold, but make sure that employee otherwise qualifies for exemption 17

18 COPING WITH THE NEW THRESHOLD The new rule DOES NOT require converting salaried employees to hourly MAY require modifications to non-payroll employee benefits 18

19 DO NOT COPING WITH THE NEW THRESHOLD Attempt to re-classify workers as independent contractors without solid grounds Wait until the last minute to develop a strategy 19

20 SUMMARY SUMMARY No one best way to handle May require employee by employee decisions QUESTIONS? 20

21 CONTACT INFORMATION Michael B. Glomb th St. NW, Suite 400 Washington, DC (202)