HRCI & SHRM. Program numbers sent to you via upon program completion.!

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2 HRCI & SHRM APPROVED WEBINAR Program numbers sent to you via upon program completion. 3

3 THANKS TO OUR SPONSOR 4

4 OUR SPEAKERS Jessica Casey Mike 5

5 TODAY S AGENDA #1 FLSA Overview #2 Proposed Changes #3 Employer Options #4 Your Communication Plan

6 FAIR LABOR STANDARDS ACT OVERVIEW Regulates: Overtime Minimum wage Wage recordkeeping Youth employment 7

7 FLSA EXEMPTION In order to be exempt from FLSA overtime and minimum wage rules, an employee must: Be paid a minimum of $455 per week, and Perform exempt job duties and responsibilities 8

8 PRIMARY DUTY No bright line test DOL definition: the principal, main, major or most important duty that the employee performs. 9

9 EXECUTIVE EXEMPTION Employee must earn a salary of $455 per week or $23,660 annually Primary duty must be managing the enterprise or one of its departments or subdivisions Regularly direct the work of 2 or more employees Have authority to hire/fire or their suggestions as to hiring, firing, advancement or other changes must be given particular weight 10

10 ADMINISTRATIVE EXEMPTION Employee must earn a salary of $455 per week or $23,660 annually Primary duty must be the performance of office or nonmanual work directly related to the management policies or general business operations of the employer or its customers Primary duty includes the exercise of discretion and independent judgment with respect to significant matters 11

11 PROFESSIONAL EXEMPTION Employee must earn a salary of $455 per week or $23,660 annually Knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction, OR Invention, imagination, originality or talent in a recognized field of artistic or creative endeavor 12

12 HIGHLY COMPENSATED EXEMPTION Employees earning more than $100,000 in annual base salary, commissions and non-discretionary bonuses Performs one or more duties of an exempt executive, administrative or professional employee 13

13 POLL QUESTION #1 MY BIGGEST CHALLENGE REGARDING THE FLSA CHANGE IS UNDERSTANDING THE CHANGES WAITING. I M IMPATIENT COMMUNICATING TO EMPLOYEES COMMUNICATION TO MANAGERS 14

14 PROPOSED RULEMAKING Announced June 30, day comment period ended September 4, ,064 comments received by DOL Implementation date: Unknown 15

15 CHANGE #1 MINIMUM SALARY INCREASE Proposed minimum for exempt employees: $921 per week or $47,892 per year (for 2015) For > $970 per week or $50,440 per year Current minimum for highly compensated employee: $100,000 per year Proposed minimum for highly compensated employee: $122,148 per year 16

16 CHANGE #2 MINIMUM SALARY FORMULA Current minimum has been stagnant for decades Proposal: set the minimum salary level to the 40 th percentile of weekly earnings for full-time salaried employees For highly compensated employees set to the 90 th percentile Use percentages to automatically adjust minimums on a yearly basis 17

17 CHANGE #3 THE DUTIES TEST No bright line rule for determining whether an employee s primary duties are exempt DOL requested comments on creating a more clear-cut duties test Example: California requires exempt employees to spend at least 50% of their time doing exempt work 18

18 CHANGE #4 COMP CALCULATION Bonuses and additional compensation are not included in the calculation for determining whether minimum salary is met DOL is requesting comments on including nondiscretionary bonuses in minimum salary calculation 19

19 THE CALM BEFORE THE STORM DO NOT PANIC Conduct a wage and hour audit Review your options for dealing with the new overtime regulations Create a plan & communication strategy 20

20 OPTION # 1 DO NOTHING Pay overtime to non-exempt employees for any time worked over 40 hours per week Simplest solution, but could also be the most expensive 21

21 Option #2: OPTION #2 LIMIT OVERTIME Create a policy forbidding or strictly limiting overtime (i.e. not without permission) Possibly hire temporary or part-time workers for cover as-needed 22

22 OPTION # 3 INCREASE PAY Give pay and give raises to employees who will become nonexempt based on salary, to bring them above the minimum This will require some financial calculations to determine whether it will be cost-effective 23

23 OPTION # 4 HOURLY PAY ADJUSTMENTS Review the number of hours an employee typically works in a week Pay the employee at an hourly rate that will result in the same net salary, including expected overtime Downside: Employees may be angry over a perceived reduction in pay 24

24 POLL QUESTION #2 THE OPTION MY COMPANY IS LEANING TOWARDS IS DO NOTHING LIMIT OVERTIME INCREASE PAY HOURLY PAY ADJUSTMENTS COMBINATION OF ABOVE 25

25 OTHER CONSIDERATIONS Previously exempt employees who work while offduty Social media Telephone calls Employee moral 26

26 INDEPENDENT CONTRACTORS DOL also targeting misclassification of workers and offered guidance in July 2015 No change in regulations (yet) DOL essentially will consider whether the independent contractor can exist without the employer (economic realities test)

27 INDEPENDENT CONTRACTOR TEST No one factor is determinative but each yes increases the chance the independent contractor is misclassified Is the work integral to the employer s business? Does the worker lack of managerial skills impact the opportunity for profit or loss?

28 INDEPENDENT CONTRACTOR TEST CON T Does the worker lack an opportunity for profit or loss in the business relationship? Does the worker simply follow orders (rather than exercising independent judgment, thought or initiative)? Does the business exercise a great deal of control over the worker?

29 POTENTIAL PENALTIES Violations of the Fair Labor Standards Act can result in an award of: Back pay for up to 3 years Liquidated damages equaling 100% of the back pay Attorney s fees 30

30 COMMUNICATE THE CHANGE Start early Provide resources manager & employee Multi-channel Provide FAQ s Establish talking points 31

31 PROVIDE RESOURCES Be realistic yet positive Seek feedback Debrief 32

32 FINAL THOUGHTS Educate your front line managers on the changes. They are your first line of communication and litigation defense. Over communicate. Otherwise someone else will. 33

33 QUESTIONS?? 34

34 THANKS TO OUR SPONSOR 35

35 SPEAKERS SOURCES Jessica LinkedIn: b4j.co/jmillermerrell Casey LinkedIn: b4j.co/caseysipe Mike LinkedIn: b4j.co/mhaberman FLSA/DOL Changes b4j.co/flsa-changes-overview FLSA Independent Contract Guidance b4j.co/flsa-contractor-2016 FLSA Changes & What You Need to Know b4j.co/flsa-changes-2016 FLSA Changes Podcast b4j.co/flsa-podcast 36

36 HRCI & SHRM APPROVED WEBINAR Program numbers sent to you via upon program completion. 37