Wage & Hour Law 2015: Employee Classification Workshop & New Overtime Rules. Anniken Davenport, Esq. - Davenport Communications

Transcription

1 Wage & Hour Law 2015: Employee Classification Workshop & New Overtime Rules Anniken Davenport, Esq. - Davenport Communications

2 Fair Labor Standards Act 2 Requires employers to pay covered or nonexempt employees 1½ times their regular wage for all hours over 40 worked in a week. Describes which classes of employees are exempt from overtime requirement. Requires employers to designate employees as exempt or nonexempt.

3 Which Employers Are Covered? 3 Businesses with at least $500,000 in annual sales. Are involved in even the smallest way with interstate commerce.

4 Common Misconceptions 4 Job Title Magic Salary equals exempt Highly paid equals exempt

5 Three Tests For Exemption 5 Salary Level Salary Basis Job Duties

6 Salary Level For most employees, $455 per week 6 May be paid in equivalent amounts for periods longer than one week Dramatic changes are ahead with new Obama Overtime Rules that focus on Salary Level!

7 OBAMA INITIATIVE 7 The Obama administration has been working on updating and simplifying the FLSA regulations in light of income inequality and falling middle class income. The proposed rules are without a doubt the most radical changes since the FLSA was passed in If put into effect as written, the rules will change the way you recruit, pay and manage employees dramatically.

8 Addresses salary level. Obama Initiative Does not suggest changes to salary basis test. Hints at changes to duties tests but doesn t outline what those changes might be. For the first time, would provide for automatic and annual increases to the salary level using either a salary survey or inflation. For the first time, sets salary level at a percentage of median salary of all full-time 35 hour salaried workers nationwide. 8

9 New Salary Level Says appropriate salary level is 40% of median salary for full-time salaried workers nationwide as established by BLS survey. Proposed regs use 2013 starting point for executive, professional and administrative employees at $921per week and $47,892 annually. Proposal states likely figure at implementation will be higher based on First Quarter 2016 survey. That figure would be $970 per week or $50,440 per year based on last survey plus inflation at 2%. Final figure depends on how long DOL takes to issue final regulations if earlier figure would be lower, if later higher. 9

10 New Salary Level Proposal also sets new salary level for so-called highly compensated exempt employees at 90% of the full-time salary survey or $122,148 annually. Dramatically, the proposes regulations also call for annual increases in the salary level something entirely unique in the long history of the FLSA. Method proposed will be one of two measures: Fixed percentile of wages (i.e. 40 and 90% of salary survey); or 10 Annual rate of inflation using the measure CPI-U the Consumer Price Index Urban prices. The CPI-U has risen an average 2.1 percent per year for the past ten years. (Source: Bureau of Labor Statistics)

11 Where we stand Comment period soon ends (9/4/15) Comments here: No word on final release could be 60, 90, 120 days. No work on duties though DOL requested comments. No word on inflation index. Review payroll now and consider what to do: Raise salaries for some? Convert others to hourly? Wait for final regulations? 11

12 Salary Basis Test 12 Regularly receives a predetermined amount of compensation each pay period (on a weekly or less frequent basis) The compensation cannot be reduced because of variations in the quality or quantity of the work performed Must be paid the full salary for any week in which the employee performs any work Need not be paid for any workweek when no work is performed

13 Improper Deductions - Examples 13 Deduction for a partial-day absence to attend a parentteacher conference Deduction of a day of pay because the employer was closed due to inclement weather Deduction of three days of pay because the employee was absent from work for jury duty, rather than merely offsetting any amount received as payment for the jury duty Deduction for a two day absence due to a minor illness when the employer does not provide wage replacement benefits for such absences

14 Safe Harbor 14 The exemption will not be lost if the employer: - has a clearly communicated policy prohibiting improper deductions and includes a complaint mechanism; - reimburses employees for any improper deductions; and - makes a good faith commitment to comply in the future. The exemption will be lost if the employer wilfully violates the policy by continuing to make improper deductions after receiving employee complaints.

15 Additional Compensation 15 An employer may provide compensation in addition to the $455 minimum guaranteed weekly salary (or revised figure), such as: - commissions - bonuses - additional pay based on hours worked beyond the normal workweek.

16 Job Duties Tests - Primary Duty 16 The principal, main, major or most important duty that the employee performs Factors to consider include, but are not limited to: Relative importance of the exempt duties; Amount of time spent performing exempt work; Relative freedom from direct supervision; and Relationship between the employee s salary and the wages paid to other employees for the same kind of nonexempt work.

17 OBAMA INITIATIVE 17 The primary duties test is the other area we believe the president is targeting for reform by Either setting a specific and high percentage of management duties/menial duties ratio or Rewriting primary duties completely. Proposed regulations asked for comments on ratio but didn t outline proposed change. Trick? Escape route?

18 Executive Duties 18 Management of enterprise/department; Directs work of two or more employees; and Authority to hire or fire other employees, or whose suggestions and recommendations as to hiring, firing, advancement, promotion or other change of status are given particular weight.

19 Administrative Duties 19 Office non-manual work directly related to management policies or general business operations; and Exercises independent discretion and judgment Production vs. administration

20 Professional Duties 20 Professionals who have advanced knowledge in a field of science or learning acquired by a prolonged course of study. Professionals who perform creative work requiring invention, imagination or originality in a recognized field of artistic endeavor.

21 Field of Science or Learning 21 Occupations with recognized professional status, as distinguished from the mechanical arts or skilled trades Law Theology Medicine Pharmacy Accounting Teaching Architecture Engineering Actuarial Computation Physical Sciences Chemical Sciences Biological Sciences

22 Proposed Regulations DOL proposed regulations asked for comments on changing jobs that should or should not be included under professional category. Signal that perhaps new jobs will be added to exempt professionals Could also mean some old jobs now automated and standardized will become hourly. 22

23 Recognized Field of Artistic or Creative Endeavor 23 Music Musicians, composers, conductors, soloists Writing Essayists, novelists, short-story writers, play writers Screen play writers who choose their own subjects Responsible writing positions in advertising agencies Acting Graphic Arts Painters, photographers, cartoonists

24 Non-Exempt Employees 24 Minimum wage ($7.25); and Overtime at a rate of not less than 1½ times their regular rate for all hours worked over 40 hours in any work week.

25 Non-Exempt Employees 25 Workweek means a fixed 7-day period

26 Non-Exempt Employees 26 Regular rate includes all remuneration paid with limited exceptions Consider Bonuses Shift differentials Commissions Other premium pay (weekend & holiday)

27 Non-Exempt Employees 27 Hours worked is defined broadly Unauthorized overtime Volunteer time On-call time Travel time Meetings and trainings Meal periods Vacation, sick days

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29 Wage & Hour Law 2015: Employee Classification Workshop & New Overtime Rules Anniken Davenport, Esq. - Davenport Communications