Client Conference Compliance Requirements You Cant Afford to Overlook

Transcription

1 Client Conference Compliance Requirements You Cant Afford to Overlook

2 Session Agenda In this session, we will review several topics: FLSA s White Collar Exemptions Final Rule Action Items How ADP Can Help Paid Sick Leave Pay Statement Compliance Pay Transparency Current Trends 2

3 Disclaimer This presentation is not: Legal Advice A Political Opinion ADP DOES NOT PRACTICE LAW OR GIVE LEGAL ADVICE ADP STRONGLY RECOMMENDS THAT CLIENTS OBTAIN QUALIFIED LEGAL COUNSEL PRIOR TO MAKING ANY DECISIONS 3

4 FLSA S White Collar Exemptions

5 The Fair Labor Standards Act Background June 25, 1938, the FLSA was passed to: Section 13(a)(1) of the FLSA: Why are there Exemptions? Guarantee a minimum wage Limit the number of hours an employee can work without additional compensation Sets the overtime pay rate at not less than 1.5 x employee s regular rate for hours worked over 40 in a workweek Excludes certain white collar employees from minimum wage and overtime pay protections Was included in the original Act but no definitions. Definitions - with TESTS added by REGULATION Belief that these workers earned salaries well above minimum wage and Enjoyed other privileges setting them apart from workers entitled to overtime 5

6 What is The Fair Labor Standards Act (FLSA)? Sets the minimum wage, compensable time and overtime requirements Exemptions from overtime requirements Required recordkeeping by employers Restrictions on the type of work children can do and the hours they can work Mandates equal pay for equal work FLSA Covers All employers must be aware not only of the FLSA, but of the state wagehour laws and municipal pay ordinances. In addition, international labor standards, and foreign labor laws impact global employers 6

7 Fair Labor Standards Act Back Wages FY 2015 Statistics Wage and hour litigation is outpacing all other types of class action suits Non-compliance leads to DOL audits, fines, awards, lawsuits, and defending actions Minimum Wage Violation Cases = 10,642 Back wages = $37,828,554 % of FLSA back wages = 22% Employees receiving back wages* = 86,229 % of employees receiving FLSA back wages = 39% Overtime Violation Cases = 10,496 Back wages = $137,701,703 % of FLSA back wages = 78% Employees receiving back wages* = 173,330 % of employees receiving FLSA back wages = 78% Over 90% of all State and Federal class action lawsuits are related to wage and hour. *Duplicated employee count: One employee can have multiple violations

8 The Rulemaking Process March 2014, Memorandum: President Obama directs Secretary of Labor Perez to revise the overtime regulations Summer 2014, Secretary Perez held listening sessions with stakeholders July 6, 2015, Wage & Hour Administrator Weil issues the NPRM, proposing changes to the Part 541 regulations. September 4, 2015, the comment period closed after nearly 300,000 comments were filed, a DOL record March 14, 2016, DOL sends Final Rule to White House Office of Management & Budget for review May 18, 2016, DOL publishes the Final Rule with an effective date of December 1,

9 DOL Website: White Collar Exemptions Executive Exemption Primary duty must be managing the enterprise and must customarily and regularly direct the work of at least two or more other full-time employees Administrative Exemption Primary duty must be performance of non-manual work directly related to the management or general business operations and includes the exercise of discretion and independent judgment with respect to matters of significance Professional Exemption Primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and is in a field of sciences or learning, acquired by a prolonged course of specialized intellectual instruction Computer Employee Exemption Must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field Outside Sales Exemption Primary duty must be making sales or obtaining orders or contracts for services; the employee must be customarily and regularly engaged away from the employer s place of business. The FLSA s salary requirements do not apply. 10

10 What is NOT Changing No changes to the salary basis test (an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis.) No changes that impact outside sales, teachers, lawyers or doctors No changes to the duties tests No changes in the definition of primary duty No changes to the concurrent duties provision 10 10

11 What is Changing: Minimum Salary Level $913 per week ($47,476 annualized) Up from the current $455 per week ($23,660 annualized) Down from DOL s proposed $50,440 Set at the 40th percentile of full-time nonhourly paid employees in the lowest wage Census region (South) 11

12 What is Changing: Bonuses and Commissions Nondiscretionary bonuses, incentive payments and commissions, paid at least quarterly, can satisfy up to 10 percent of the minimum salary requirement 12 12

13 What is Changing: Highly Compensated Employees $134,004 total annual compensation Up from the current $100,000 Up from DOL s proposed $122,000 Set at the 90th percentile of full-time non-hourly paid employees nationwide 13 13

14 What is Changing: Automatic Increases The salary levels will automatically increase every 3 years, beginning January 1,

15 Projected Impact

16 Projected Impact Year 1: New Rule will extend overtime protections to nearly 4.2 million white collar workers 65,000 HCE workers impacted Year 10: Average transfers of income from employers to employees over first 10 years are estimated to be approximately $1.2 billion per year Average annualized direct employer costs will total approximately $295 million per year over the first ten years 16

17 What Should Clients Do Now?

18 What challenges do employers face? Misclassification of employees and Wage and Hour Compliance Due to the sometimes ambiguous nature of employee classification as exempt or nonexempt, many employers struggle with properly classifying their employees under FLSA guidelines. Under the new rules, this challenge is likely going to be highlighted for many employers who will have to reconsider the classification of their exempt employees whose salaries fall below the new minimum threshold. The DOL estimates that as many as 4.2 Million workers may need to be reclassified as a result of the FLSA rule change. The DOL estimates that as many as 70% of employers are not in full compliance with the FLSA. 21

19 What challenges do employers face? Properly tracking, calculating and paying employee overtime can be a challenge for many employers. With over an additional four million employees expected to be eligible for overtime, the need for proper tracking, calculating and paying of employee overtime is greater than ever. Overtime Tracking Challenges: Properly tracking hours and calculating overtime Anticipating overtime before it happens Visibility into total hours worked Understanding the impact of unplanned and planned absences Employees requesting and managers approving overtime Minimizing or avoiding overtime when scheduling Reporting on overtime Auditing the history Knowing how much overtime is worked by those that do and do not currently record time 22 The average Wage & Hour case settlement is $6.9 Million * 90% * of cases that resulted in back wages being paid included overtime *Source: NERA Economic Consulting, Trends in Wage and Hour Settlements, July 14, 2015.

20 Compliance Recommendations Determine Who in Your Workforce is Impacted Perform Financial Impact Analysis Use Custom ADP Reports Perform an HCM/Cultural Impact Analysis Will new policies need to be drafted to keep new non-exempt employees with same PTO, telecommuting etc. Are benefits impacted? New timecards, additional clocks? Make October 15th your organization s communication deadline Wage Payment Notification Laws (one pay period advance notice) Be transparent and detailed (Tell impacted employees how a reclassification will impact them; i.e. punch clocks, sign-off on policies, adjusted pay schedule, STD, benefits, PTO, etc.) 20

21 Call to Action FINANCIAL IMPACT Perform a FINANCIAL IMPACT Analysis of Workforce* Who is earning less than $47,476? Cost Comparison - Should I increase salary or re-classify? Should you INCREASE SALARY to maintain exempt status? OR Should you MAINTAIN SALARY, and RECLASSIFY as non-exempt? Overtime Pay? Hire new FTEs in that position? *Remember, states have their own thresholds 21

22 Call to Action HCM IMPACT Perform an HCM IMPACT Analysis How will Re-Classified Employees be Impacted? Processes? Punching in/out; Restrictions; Enforcing policies Policies? PTO; Mobile Devices; Bonuses What should I say to impacted employees? Who will communicate the changes? What will be communicated? When will the communications be made? Talking Points and FAQs 22

23 Call to Action OPPORTUNITY TO REVIEW Independent Contractor Misclassification Overtime Misclassification Deductions from Exempt Salary Automatic Meal Break Deductions Paying by Shift or Exception Pre- and Post-Shift Activities Meeting and Training Time Travel Time Shift Differentials and Other Extras Bonuses and Commissions for Non-Exempt Employees 23

24 How Can ADP Help?

25 Client Benefits Technology Built just for New FLSA White Collar Exemptions To evaluate the impact of the FLSA changes, two new sample reports were created; FLSA Salary Threshold Worksheet FLSA Cost Comparison Worksheet WFN Current version: Reports > Custom Reports > Sample Reports 28 WFN V2: Custom Reporting > Run > Run Reports > Run Standard and Sample Reports

26 Client Benefits Technology Salary Threshold Worksheet Overtime Exemption Threshold is entered at the time the report is run and has been pre-set to $47,476, based on the threshold established by the DOL. Clients have the option to change this to a different value, for purposes of projecting the impact of future increases to the threshold. 29

27 Client Benefit Technology Cost Comparison Worksheet Enables clients to compare options and identify which is a lower cost: a) increase employee s salary above threshold and maintain exempt status; or b) maintain employee s current salary, reclassify as non-exempt and possibly pay overtime Projected Lower Cost Option is determined by comparing Amount to Reach Threshold Projected Annual OT Pay Overtime Exemption Threshold is entered at the time the report is run and has been pre-set to $47,476, based on the threshold established by the DOL. Important note: The projections and calculations in the FLSA Cost Comparison Worksheet only consider DOL s minimum salary threshold to qualify for exemption from the FLSA overtime requirements as an executive, administrative, professional or computer employee. The primary duties tests are not taken into consideration. 30

28 Client Benefits Technology Existing Mass Change Functionality Clients can use Workforce Now Mass Change functionality to quickly and easily make changes to multiple employees at the same time Increase salaries (to maintain exemption) Change FLSA status of certain Job Titles WFN V2: Payroll > Employee > Employee Tasks > Mass Change WFN current version: Process > HR > Mass Change

29 Client Benefits Technology More Enhancements! Value-Add Interactive FLSA Dashboard Coming Soon! Default Alerts You have X # of clients classified as exempt who are close to the minimum threshold. Employer will want to consider whether they may need to be reclassified soon or their salary should be increased to maintain exemption. Custom Alerts You have Y # of employees classified as non-exempt who are close to the minimum threshold. Employer will want to consider their job duties, perhaps by giving a merit increase they will be close to threshold. If so and if meet exempt duties you may consider reclassifying them as exempt (no more overtime what will that mean to your bottom line?) More to Come! Note: This functionality is being built, and will be in WFN in the near future. We make no representation as to exactly when it will be released or as to its exact functionality as it is subject to change. 32

30 Additional Offerings with Technology Solutions

31 How can ADP help? FLSA Readiness Review Overview: Provides WFN technology clients the opportunity to partner with an HCM Consultant to help assess the organization s readiness for FLSA Compliance and develop a strategy for compliance. Delivered: Virtually as a series of customized, interactive webinars; defined engagement One-hour Preparatory call using questionnaire as a guide Two-hour customized session One-hour wrap up call Objective: Help clients prepare to comply with the new FLSA Overtime Rule effective 12/1/2016 and ensure there is a well-defined strategy and communication plan in place. IMPORTANT: This offering does not include exemption status determinations for jobs as this would be construed as legal advice. 34

32 Summary Description FLSA Readiness Review Offering Component Description Benefit Preparatory Call Regulatory Overview WFN Capabilities Review WFN Custom Reports Communication Plan Project Plan HCM meets with client for one (1) hour to review FLSA areas of concerns and confirm client-specific needs. HCM reviews the key provisions of the FLSA Final Overtime Rule. Information can be personalized based on clients needs and current understanding. HCM reviews system prior to Main Session and then discusses how WFN may need to be updated based on the regulatory changes and client s chosen approach. HCM runs FLSA Threshold and Cost Comparison reports and analyzes and highlights potential areas of concern. Detailed plan of communication including impacted parties, key messages, methodology, and talking points. Detailed plan of action steps, responsible parties, due dates, etc. Ensures client s Main Session is properly customized based on the client s needs. Ensures client is fully educated on the regulation, providing a good foundation from which to make decisions. Client gains greater knowledge regarding all potential updates needed in WFN. Assists clients that may have bandwidth issues with preparatory analysis of salary/flsa data in WFN. Provides client with an organizational communication plan outline, so they may take a proactive approach. Provides action plan template, enabling client to more easily formalize FLSA Readiness Strategy; ensures key steps are not missed. 35

33 PAID SICK LEAVE

34 Paid Sick Leave States California (July 1, 2015) Connecticut (January 1, 2012) Massachusetts (July 1, 2015) Oregon (January 1, 2016) Vermont (January 1, 2017) Illinois (January 1, 2017 awaiting IL DOL rules) Municipalities California Emeryville, Long Beach, Los Angeles, Oakland, San Diego*, San Francisco, Berkeley (October 1, 2017) District of Columbia (D.C.) Louisiana New Orleans (city contractors and grant recipients only) (January 2016) Maryland - Montgomery County (October 2016) New Jersey Bloomfield, East Orange, Elizabeth, Irvington, Jersey City, Montclair, Newark, Passaic, Paterson, Plainfield (March 2016), Trenton, New Brunswick New York New York City Oregon Eugene (January 2016), Portland Pennsylvania Philadelphia Washington Seattle, Tacoma (February 2016), Spokane (January 1, 2017) Minnesota Minneapolis (July 1, 2017), St. Paul (July 1, 2017) Illinois Chicago (July 1, 2017) 34

35 Paid Sick Leave Pay Statement Impact Potential payroll impact pay statement requirements California requires the balance of paid sick leave available to be displayed on an employee s pay statement or a separate writing issued on the employee s designated pay date Oregon requires amount of paid sick leave available to be disclosed to the employee at least quarterly and can be included on the pay statement Montgomery County, Maryland requires the amount of paid sick leave available to be disclosed to the employee in writing with each payment of wages 35

36 PAY TRANSPARENCY

37 Pay Transparency Federal Contractors Effective January 11, 2016 Pay Transparency Policy Statement The contractor will not discharge or in any other manner discriminate against employees or applicants because they have inquired about, discussed, or disclosed their own pay or the pay of another employee or applicant. EXCEPTION Oregon. Pay Transparency. Effective January 11, Prohibits employers from discriminating against an employee who inquires about, discusses or discloses his/her wages or the wages of another employee. EXCEPTION. New York. Pay Transparency. Effective January 21, Prohibits employers from discriminating against an employee who inquires about, discusses or discloses his/her wages or the wages of another employee. NO EXCEPTION 37

38 Legislative Update

39 Client Conference Thank you!