New Federal Overtime Exemption Regulations

Transcription

1 ABA BRIEFING PARTICIPANT S GUIDE New Federal Overtime Exemption Regulations Significant Issues for the Banking Industry Thursday, July 30, 2015 Eastern Time 2:00 p.m. 3:30 p.m. Central Time 1:00 p.m. 2:30 p.m. Mountain Time 12:00 p.m. 1:30 p.m. Pacific Time 11:00 a.m. 12:30 p.m.

2 American Bankers Association New Federal Overtime Exemption Regulations Thursday, July 30, :00 p.m. 3:30 p.m. ET DISCLAIMER This Briefing will be recorded with permission and is furnished for informational use only. Neither the speakers, contributors nor ABA is engaged in rendering legal nor other expert professional services, for which outside competent professionals should be sought. All statements and opinions contained herein are the sole opinion of the speakers and subject to change without notice. Receipt of this information constitutes your acceptance of these terms and conditions. COPYRIGHT NOTICE USE OF ACCESS CREDENTIALS 2015 by American Bankers Association. All rights reserved. Each registration entitles one registrant a single connection to the Briefing by Internet and/or telephone from one room where an unlimited number of participants can be present. Providing access credentials to another for their use, using access credentials more than once, or any simultaneous or delayed transmission, broadcast, re-transmission or re-broadcast of this event to additional sites/rooms by any means (including but not limited to the use of telephone conference services or a conference bridge, whether external or owned by the registrant) or recording is a violation of U.S. copyright law and is strictly prohibited. Please call if you have any questions about this resource or ABA membership.

3 American Bankers Association New Federal Overtime Exemption Regulations Thursday, July 30, :00 p.m. 3:30 p.m. ET Table of Contents TABLE OF CONTENTS... II SPEAKER & ABA STAFF LISTING... III SPEAKER BIOGRAPHIES... IV PROGRAM OUTLINE... V CONTINUING EDUCATION CREDITS INFORMATION... VI CPA SIGN-IN/SIGN-OUT SHEET... VII INSTRUCTIONS FOR RECEIVING CERTIFICATES OF COMPLETION.. VIII PROGRAM INFORMATION... ENCLOSED PLEASE READ ALL ENCLOSED MATERIAL PRIOR TO BRIEFING. THANK YOU. The Evaluation Survey Questionnaire is available online. Please complete and submit the questionnaire at: Thank you for your feedback. II

4 American Bankers Association New Federal Overtime Exemption Regulations Thursday, July 30, :00 p.m. 3:30 p.m. ET Speaker and ABA Staff Listing Speaker Steve Greene Managing Member Helms & Greene, LLC 5 Concourse Parkway, N.E. Suite 2575 Atlanta, Georgia (770) sgreene@helmsgreene.com sgreene@employlawcompliance.com Speaker/Moderator Cristeena G. Naser Vice President and Senior Counsel Center for Securities, Trust & Investment American Bankers Association ABA Briefing Staff Cari Hearn Senior Manager (202) chearn@ Linda M. Shepard Senior Manager (202) lshepard@ American Bankers Association 1120 Connecticut Avenue, NW Washington, DC www. Deputy General Counsel ABA Securities (202) cnaser@ III

5 American Bankers Association New Federal Overtime Exemption Regulations Thursday, July 30, :00 p.m. 3:30 p.m. ET STEVE GREENE Speaker Biographies Steve Greene specializes in employment litigation, employee benefit issues and compensation matters. He regularly speaks to employment lawyers, compensation professionals and human resources executives concerning application of these legal standards on behalf of SHRM, CUPA-HR, World at Work, the American Bankers Association, and other national trade groups. During the past 25 years, Steve has assisted Fortune 500 companies evaluate overtime exemption compliance and design compliant compensation methodologies. He has also assisted employers manage Department of Labor and state regulatory investigations across the country. Steve represents employers defending compensation claims brought in individual, collective, and class actions. His work has also included educating and influencing the DOL and members of Congress to reform the federal employment standards. Steve also oversees employment litigation nationally, including discrimination, harassment, retaliation, ERISA, and breach of contract actions brought against employers. Litigation handled by Steve and the firm also include actions where the employer enforces restrictive covenants, or otherwise pursues trade secret, duty of loyalty, and business interference claims against departing employees and their new employers. Steve s work involves representing our employment clients, as well as supporting high-quality EPLI carriers. He received his J.D. from Southern Methodist University, and his B.A. from the University of Maine. CHRISTEENA G. NASER Cris Naser is Vice President and Senior Counsel in the Center for Securities, Trust and Investment group of ABA s Government Relations Division, and also Deputy General Counsel of the ABA Securities Association. She is responsible for ABA s regulatory efforts on asset-backed securities, corporate trust, municipal securities, money market mutual funds, shadow banking, transfer agent, medallion signature guarantee, and other securities issues. In 2006, Cris successfully completed the requirements to be a Certified Corporate Trust Specialist. In addition to these responsibilities, Cris is the primary author of ABA s monthly compliance newsletter, the Regulatory and Legislative Advisory. As such, she follows closely the myriad of regulatory, legislative and judicial developments of interest to compliance officers. Cris also monitors regulatory, judicial and legislative issues involving employment law and is responsible for ABA s advocacy efforts in this area. Prior to joining the ABA, Cris was Senior Attorney at the Federal Deposit Insurance Corporation. She was also in private practice in Washington D.C. as a bank regulatory attorney. Cris holds an undergraduate degree from George Washington University and earned her JD at the George Washington University National Law Center. Cris is a member of the District of Columbia and Maryland Bar Associations. IV

6 American Bankers Association New Federal Overtime Exemption Regulations Thursday, July 30, :00 p.m. 3:30 p.m. ET Program Outline TIMES SESSION & SPEAKERS 2:00 2:04 p.m. ET Introduction Overview of Program, Welcome Introduction of Speakers 1Source International 2:04 2:20 p.m. New Exemption Salary Methodology Cris Naser, American Bankers Association 2:20 2:40 p.m. Issues Under Further Consideration Steve Greene, Helms & Greene, LLC 2:40 3:00 p.m. Compliance Options Cris Naser and Steve Greene 3:00 3:30 p.m. Questions & Answers, Wrap-up V

7 American Bankers Association New Federal Overtime Exemption Regulations Thursday, July 30, :00 p.m. 3:30 p.m. ET Continuing Education Credits Information This ABA Briefing did not qualify for continuing education credits for Institute of Certified Bankers (ICB) designations. Please contact ICB with any questions at or American Bankers Association is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: CPE credit hours (Regulatory Ethics) will be awarded for attending this group-live Briefing. Participants eligible to receive CPE credits must sign in and out of the group-live Briefing on the CPA Required Sign-in/Sign-out Sheet included in these handout materials. A CPA/CPE Certificate of Completion Request Form also must be completed online. See enclosed instructions. Continuing Legal Education Credits This ABA Briefing is not pre-approved for continuing legal education (CLE) credits. However, it may be possible to work with your state bar to obtain these credits. Many states will approve telephone/ audio programs for CLE credits; some states require proof of attendance and some require application fees. Please contact your state bar for specific requirements and submission instructions. VI

8 American Bankers Association New Federal Overtime Exemption Regulations Thursday, July 30, :00 p.m. 3:30 p.m. ET CPA Required Sign-in/Sign-out Sheet CPAs may receive up to 1.5 hours of Continuing Professional Education (CPE) credit for participating in this group-live Briefing. INSTRUCTIONS: 1. Each participating CPA must sign-in when he/she enters the room and sign-out when he/she leaves the room. 2. Name and signature must be legible for validation of attendance purposes as required by NASBA. 3. Unscheduled breaks must be noted in the space provided. 4. Each participating CPA must complete, online a CPA/CPE Certificate of Completion Request Form (instructions enclosed). 5. Individuals who do not complete both forms will not receive their Certificate of Completion. This CPA/CPE Sign-in/Sign-out Sheet must be scanned and uploaded with the Request for Certificate of Completion form in order to receive your certificate of completion. FULL NAME (PLEASE PRINT LEGIBLY) SIGNATURE TIME IN TIME OUT UNSCHEDULED BREAKS American Bankers Association is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: Please note: CPE credits are ONLY awarded to those who have listened to the live broadcast of this Briefing. VII

9 American Bankers Association New Federal Overtime Exemption Regulations Thursday, July 30, :00 p.m. 3:30 p.m. ET Instructions for Receiving Certificates of Completion CPA/CPE Certificate of Completion Submission of a sign-in/sign-out sheet AND electronic request for a Certificate of Completion are required for the validation process to be completed. NASBA requires ABA to validate your attendance BEFORE you will receive your Certificate of Completion. 1. COMPLETE a CPA / CPE Certificate of Completion Request Form online at: 2. SCAN and UPLOAD the completed CPA / CPE Required Sign-in/Sign-out Sheet (enclosed) and include it with the Request for CPE / CPA Certificate of Compliance form found in Step SUBMIT completed Request form and Sign-in/out Sheet 4. ABA staff will VALIDATE your attendance upon receipt of the Certificate of Completion Request Form and Sign-in/out Sheet. 5. A personalized certificate of completion will be ed to you within 10 business days once your attendance is validated. 6. QUESTIONS about your certificate of completion? Contact us at briefingcertificates@ General / Participant Certificate of Completion 1. REQUEST a General / Participant Certificate of Completion at: 2. A personalized certificate of attendance will be ed to you within 10 days of your request. 3. QUESTIONS about your certificate of completion? Contact us at briefingcertificates@ VIII

10 7/28/2015 New Federal Overtime Exemption Regulations Significant Issues for the Banking Industry American Bankers Association Briefing/Webinar Thursday, July 30, :00 3:30 p.m. ET DISCLAIMER This Briefing will be recorded with permission and is furnished for informational use only. Neither the speakers, contributors nor ABA is engaged in rendering legal nor other expert professional services, for which outside competent professionals should be sought. All statements and opinions contained herein are the sole opinion of the speakers and subject to change without notice. Receipt of this information constitutes your acceptance of these terms and conditions. 1

11 7/28/2015 Presenters Cris Naser, Vice President and Senior Counsel, Center for Securities, Trust & Investment, American Bankers Association Steve Greene, Managing Member, Helms & Greene, LLC Agenda New Exemption Salary Methodology Issues Under Further Consideration Compliance Options Questions & Answers 2

12 7/28/2015 Key Changes Salary Test Current Regulations set Minimum Salary Level at $455 per week ($23,660 annually) New Regulations set Minimum Salary Level at 40 th percentile of weekly wages of all full-time salaried employees Using 2013 data, salary level would be $921 per week, as reflected in proposed regulations Using DOL projections for 2016 data, salary level would be $970 per week Impacted Exemptions White Collar Salary Tests Executive Administrative Professional Computer Not Outside Sales no salary component 3

13 7/28/2015 Key Changes Highly Compensated Employee Compensation Test Current Regulations set Required Annual Compensation Level at $100,000 annually New Regulations will set Required Annual Compensation Level at 90 th percentile of weekly wages of all full-time salaried employees For 2016, the figure is expected to be $122,148 Key Changes Annual Salary Adjustments DOL will publish annually updated figures for 40 th percentile and 90 th percentile DOL will provide 60 days notice of changes At conclusion to 60 day period, new salary level and compensation level (highly compensated employees) will become effective 4

14 7/28/2015 National Variations in Salary Level DOL does not believe in different salary levels for different parts of the county DOL does not believe in different salary levels for different kinds of business DOL does not believe in different salary levels for different sizes of employers DOL fully recognizes impact on low-wage regions and low-wage industries DOL Rationale Simplify the identification of nonexempt employees Salary level best single test of exempt status Reducing significance of the duties test results in simplification Changes would significantly reduce overtime exemption litigation Agency seek to counteract more flexible primary duty test enacted in 2004 regulations 5

15 7/28/2015 Issues Under Study Nondiscretionary Bonuses DOL considering whether nondiscretionary bonus would be a credit towards salary payment Using component of current highly compensated employee test DOL may distinguish between bonuses/incentives and commissions Commission would not be credited DOL may allow a credit up to 10% of required salary payment Incentives will likely need to be paid out frequently (i.e., monthly) to qualify Issues Under Study Duties Test Current Standard Primary Duty Principal Main Major Most Important Consider character of the job as a whole Time spent on tasks not determinative Qualitative Standard 6

16 7/28/2015 Issues Under Study California Rule or Old Long Test California Standard Primarily Engaged 51% of actual work time each week Purely Quantitative Old Long Text 20% tolerance for nonexempt work Applied to employees paid between $155 and $250 per week Purely Quantitative Duties Test New Standard Consider Retail Manager Four Direct Reports Currently Exempt under Executive Test Primary Duty Management With Four Direct Reports 30% +/- Supervisory Tasks 70% +/- Work Similar to Subordinates Nonexempt under contemplated Rule 7

17 7/28/2015 Duties Test New Standard First and Foremost How the Employee Actually Spends His or Her Time Actual Tasks Performed by Employees During time in exempt classified position (not each day, each week, or each month) Concurrent Performance of Exempt and Non-Exempt Duties California Agency impossible to perform exempt and management work at the same time (1993 opinion letter) What is the type of work the individual is actually doing? 8

18 7/28/2015 Closely Associated Nonexempt Duties (directly supporting Exempt Work) Nonexempt work is activity of the same nature as that performed by nonexempt subordinates Nonexempt work not performed by subordinates requires careful study to identify how the activity assists in the completion of specific exempt tasks (i.e., keeping performance records of subordinates) Why is the individual performing the nonexempt tasks? Is the reason to support completion of exempt duties? Is there another reason? Issues Under Study Updated Computer Related Occupation Include additional examples of exempt computer related roles (i.e., information technology specialist ) Include additional examples of nonexempt computer related roles (i.e., help desk operation ) DOL recognizes it has limited discretion given FLSA statutory language 9

19 7/28/2015 Mortgage Loan Officers Administrative Exemption 2006 DOL Opinion Letter MLOs qualified for the administrative exemption i.e., exercised independent judgment/discretion directly related to management and general business operations DOL Interpretation MLOs are engaged in sales and produce loans and no longer qualify for the administrative exemption duties test Supreme Court upheld the Interpretation against a challenge that changing the position without notice was an abuse of regulatory discretion Consumer Lenders Administrative Exemption Under the 2010 Interpretation, advice to Individuals (i.e., consumers) is nonexempt work What is a consumer lender How does DOL Interpretation apply Rationale 10

20 7/28/2015 Commercial Lenders Administrative Exemption What is a commercial lender How does DOL Interpretation apply Rationale Mixed Roles Primary Duty Mortgage Loan Officer Outside Sales Exemption Selling Product or service door to door sales person Primary Duty away from bank location Primary Duty away from home offices Typically customer contact at home or place of business 2006 DOL Opinion Letter 11

21 7/28/2015 Mortgage Loan Officer Outside Sales Exemption Work from Bank Office Work from Home Work from Real Estate Office Independent Work from Community Development Office Independent Directly Related to Outside Sales prepare for visits Follow-up from visits Not solicitation by telephone, , or fax Implications New salary level will adversely impact 6.0 million exempt individuals 40% of impacted employees work in small entities Financial services industry has largest percentage of affected small entity employees 12

22 7/28/2015 New Compliance Approach Salary Threshold Identify current exempt classified positions below $970 per week figure Consider salary adjustment to $970 effective January 1, 2016 Consider incentive plans offered to impacted individuals (move from incentive to more guaranteed compensation) Evaluate roles which require periodic or regular overtime work Establish new hourly rates of pay adjusting for anticipated overtime work to maintain approximate current total compensation New Compliance Approach Primary Duty Test Identify exempt classified positions paid between $50,440 and $122,148 (new highly compensated employee test) Confirm satisfaction of duties test (executive, administrative, professional, or computer) Update job description and documentation reflecting actual duties and responsibilities Confirm reliance on Outside Sales Exemption, based upon new DOL reference to traveling salesman 13

23 7/28/2015 New Compliance Approach Limit Hours Worked Can work demands be satisfactorily performed within 40 hours? Can organization implement overtime approval policy Must be communicated Must be managed Cannot tolerate noncompliance Must be real New Compliance Approach Alternative Pay Plan - FWWPP FLSA contemplates alternative pay plans that may be worth considering Fluctuating Workweek Pay Plan for example Requires weekly salary no deductions if any work performed in week ( super salary ) Salary covers straight time compensation for all regular and overtime hours worked Overtime is computed at ½ the employee s effective hourly rate of pay (as compared to 1 ½ times) Effective hourly rate will vary each week as hours worked varies 14

24 7/28/2015 How to Submit Questions If you are participating on the Web: Enter your Question in the Questions Box and Press ENTER / SUBMIT If you are participating by Phone: your question to: aba@1source-intl.net 15

25 EMPLOYMENT LAW COMPLIANCE, INC. HUMAN RESOURCE SOLUTIONS Bankers asked, we answered 5 Concourse Pkwy NE, Suite 2575 sgreene@employlawcompliance.com Atlanta GA Telephone: (866) Facsimile: (770) OVERTIME EXEMPTION COMPLIANCE ASSESSMENT The Department of Labor has just released new proposed overtime exemption regulations, which will have a dramatic impact on the banking industry. The new standards have been introduced to achieve President Obama s stated intention of causing employers to reclassify individuals to non-exempt status. We have developed an assessment methodology and tools to facilitate banks conducting their own self-audit. Banks need to identify current exempt classified positions which will be adversely affected by the new rules. Organizations can then assess compliance and cost management options in advance of the regulatory effective date. We provide the sequence of steps, the community bank assessment tools, and the legal guidance. Human Resource professionals within the Bank will gather and analysis the data, which will lead to updated classification determinations. I. INFORMATION ANALYSIS The assessment begins with a review of payroll records and position descriptions to determine whether existing documentation is in place to conduct an efficient and effective review. The Bank will gather the required documents (compensation, incentive, and organizational structure) and we will review those documents. II. JOB ANALYSIS CHECKLIST For those positions within the Bank subject to challenge under the new regulations, we will prepare job specific analysis checklists based upon the Bank s current job descriptions. We will provide those job analyses checklists to the Bank. III. JOB CONTENT ANALYSIS The Bank s human resource professionals will confer with Bank supervisors and management to conduct that internal study.

26 IV. LEGAL ANALYSIS We will review this data and suggest whether the position would likely be viewed as exempt on a go-forward basis. In some cases, we may recommend changes to the mix of duties and responsibilities for a position, so the Bank could retain exempt status. In other cases we may recommend an alternative pay plan or specific policy - control to reduce overtime costs for the Bank. V. WRITTEN REPORT Each Assessment will create an attorney/client relationship for the purposes of this project. Therefore, all communication will be protected by the attorney/client privilege. This provides a unique opportunity for complete candor, teamwork, and little risk of subsequent disclosure in an investigation or lawsuit. Participating banks will receive a written report identifying classification conclusions. VI. PRICING We have agreed to a reduced fee schedule for association members. The fee varies depending on the number of employees employed by the Bank. Bank Size Non-Member Fee Member Fee 0-30 Employees $1,550 $1, Employees $2,400 $1, Employees $3,950 $2, Employees $6,300 $4, Employees $8,700 $7, or more Employees Individually negotiated Individually negotiated Banks who wish to participate in an Assessment may obtain additional information by calling , ing bankers@employlawcompliance.com or faxing us at

27 EMPLOYMENT LAW COMPLIANCE, INC. 5 Concourse Pkwy NE, Suite 2575 Atlanta GA Telephone: (866) Facsimile: (770) HUMAN RESOURCE SOLUTIONS Bankers asked, we answered BANKERS OVERTIME EXEMPTION TOOLKIT The Fair Labor Standards Act requires the payment of one and a half times the regular rate for all hours worked in excess of forty during the work week. The misclassification of employees as exempt continues to be a major area of exposure for banks. The United States Department of Labor just issued proposed regulations which dramatically restrict the white collar exemptions. The new rules are expected to go into effect later in the year. The new rules require banks to review their classification of exempt and non-exempt employees, and to bring the exempt/non-exempt treatment of positions into line with the regulations, while minimizing exposure to claims based on misclassification. The Bankers Overtime Exemption Toolkit provides step-by-step guidance specifically designed for the banking industry. The Guide has been designed by experts on Wage and Hour law, and a team of employment compliance professionals with many years experience assisting banks. Look at these components addressing the new rules. Model Job Evaluations for the most common Bank positions. Accounts Payable Clerk Job Analysis Assistant Branch Manager Job Analysis Bank Trust Officer Job Analysis Benefits Administrator Job Analysis Bookeeper Job Analysis Branch Manager Job Analysis Branch Operations Officer Job Analysis Branch Operations Specialist Job Analysis Business Banker Job Analysis Business Credit Analyst Job Analysis Commercial Credit Manager Job Analysis Commercial Lending Job Analysis Compliance Officer Job Analysis Consumer Loan Officer Job Analysis Customer Service Representative Job Analysis Financial Advisor Job Analysis Head Teller Job Analysis Human Resource Generalist Job Analysis Human Resources Manager Job Analysis Information Systems Manager Analysis Loan Adjuster Job Analysis Loan Officer Job Analysis Management Trainee Job Analysis Mortgage Loan Processing Clerk Job Analysis Mortgage Originator Job Analysis Operations Manager Job Analysis Reg Ops Manager Job Analysis Security Manager Job Analysis Senior Accounting Officer Job Analysis Senior Audit Officer Job Analysis Senior Credit Officer Job Analysis Technology Support Manager Job Analysis Technology Support Specialist II Job Analysis Teller Job Analysis Treasury Management Officer Job Analysis Wealth Management Officer Job Analysis

28 Self assessment Process to expedite review and generate accurate results. Easy to read Comparison Charts giving an overview of the most significant bank industry differences between the proposed regulations and the current standards. Overtime Exemption Checklists that allows position-by-position assessment of classification compliance. Special Checklist to evaluate application of outside sales exemption to lending positions. Job Evaluation Questionnaires to aid in developing FLSA-compliant job descriptions for your Bank. Guidelines for implementing a Good Faith Compliance Initiative that allows the Bank to retain exempt status, even after making improper deductions. Key DOL authorities impacting community banks. Recordkeeping Checklist Hours Worked Checklist Minimum Wage Checklist Computing Overtime Payments Checklist Halftime Overtime Premium and Coefficient Table Wage-Hour Investigation Guidelines PRICING The Bankers Overtime Exemption Toolkit is available for $ Bankers interested in purchasing the Bankers Overtime Exemption Toolkit may call toll free, to bankers@employlawcompliance.com, or fax us at You can learn more about ELC s Solutions and Services at our website:

29 From: ABA HR Issues To: Cristeena Naser Subject: Human Resources - July 21, 2015 Date: Tuesday, July 21, :38:57 PM July 21, 2015 HOT TOPICS Banker Participates in SBA Roundtable on DOL Overtime Proposal On July 16, Karen Glenn, President and CEO of First United Bank and Trust Company, Madisonville, KY and member of ABA s Community Bankers Counsel, participated in a roundtable hosted by the Small Business Administration on the Department of Labor s overtime proposal. The proposal would more than double the salary basis test the level below which all employees must be paid overtime beyond 40 hours per week, regardless of their duties raising it to $50,544 per year. Glenn spoke of the fact that the variance in the cost of living from state to state was not taken into consideration in DOL s calculation of the new salary test. She also cited the number and percentage of employees in her bank that would no longer be exempt, the potential additional overtime costs and the impact of the change to non-exempt status on employee morale, particularly with respect to branch managers. Resources ABA Endorsed Solutions from the Corporation for American Banking Search Now ABA Frontline Compliance: A free online training solution for member banks. Learn More ABA s Cris Naser will participate in the SBA roundtable in Washington, D.C. tomorrow. One more roundtable is planned for New Orleans, Louisiana on August 12. Click here for more information on the New Orleans roundtable. Read an ABA Staff Analysis of the proposal. ABA Advocacy Efforts on Overtime Proposal Your Help Is Needed ABA opposes these changes and is advocating on behalf of our members in a number of arenas. ABA is part of the Partnership to Protect Workplace Opportunity (PPWO), a broad coalition of trade associations opposing the proposal. The PPWO, as well as ABA and other bank trade associations, have filed letters seeking an extension of the comment period, now set for September 4. ABA will participate in a joint trades letter responding to the proposal and will file its own letter focused on the impact on community banks. ABA needs feedback from you to effectively inform DOL of the impact on community banks. We need you to share your stories of how the proposal would affect your bank for inclusion on an anonymous basis in ABA s own letter. You may want to consider presenting the following aspects of your stories: Number of currently exempt employees who do not earn $50,544 annually and their percentage of your total workforce; Potential costs of overtime; How long such employees have been exempt; Possible morale problems as a result of losing exempt status; Whether the other employee benefits (health care, etc.) you provide are higher than in your general area, i.e., the total

30 compensation package; and Loss of flexibility for both the bank and its newly non-exempt employees. Send your stories to ABA s Cris Naser. ABA Briefing July 30 ABA will have a 90-minute briefing on the proposal and its implications for the banking industry at 2:00 p.m. Eastern Time on July 30. Register for the briefing. DISCRIMINATION ABA Newsbytes: HR Compliance is a service of the American Bankers Association. ABA Members: To unsubscribe and to manage your subscriptions, please visit ABA Bulletins and check or uncheck the appropriate boxes. If you have questions, call Cristeena Naser, Vice President and Senior Counsel at (202) , or send an to cnaser@. American Bankers Association, 1120 Connecticut Ave. NW, Washington DC EEOC: Discrimination Based on Sexual Orientation Is Sex Discrimination Under Title VII The U.S. Equal Employment Opportunity Commission has issued a potentially groundbreaking decision, Complainant v. Foxx, finding that discrimination based on "sexual orientation" can be brought under Title VII of the Civil Rights Act of 1964 (Title VII). In so ruling, the Commission rejected several circuit court decisions that ruled Title VII does not include protection from discrimination based on sexual orientation. The Commission held, "[s]exual orientation discrimination is sex discrimination because it necessarily entails treating an employee less favorably because of the employee's sex." In reaching its conclusion, the Commission held "[d]discrimination on the basis of sexual orientation is premised on sex-based preferences, assumptions, expectations, stereotypes, or norms. 'Sexual Orientation' as a concept cannot be defined or understood without reference to sex." Read the decision. For more on this decision, click here for an article by Denise Visconti and Kyle Nageotte of the law firm of Littler Mendelson. MISCELLANEOUS DOL Issues Guidance on Independent Contractor Status On July 15, 2015, DOL issued guidance on determining whether a worker is an independent contractor in the form of an Administrator s Interpretation. Describing independent contractor misclassification as resulting in an uneven playing field for employers and as a means to cut costs and avoid compliance with labor laws for other employers, it is

31 no surprise that DOL s Administrator s Interpretation No adopts perhaps the most expansive definition of employee possible. Specifically, DOL outlines that the economic realities test governs the determination of independent contractor status. For a discussion of the Administrator s Interpretation and the economic realities test, click here for an article by Margaret Santen Hanrahan of the law firm of Ogletree Deakins. (This article was drafted by the attorneys of Ogletree Deakins, a labor and employment law firm representing management, and is reprinted with permission. This information should not be relied upon as legal advice.) ABA Seeks Feedback on Relaunched Banking Journal ABA invites bankers to share feedback on the first issue of the newly designed and relaunched ABA Banking Journal and its accompanying news site, which is home to content from the magazine and from ABA s bulletins including Newsbytes. Take the brief survey. Help our provider improve its filters. Click here to report this as spam.

32 July 2015 ABA Staff Analysis: DOL Overtime Proposal Comments Due September 4, 2015 On June 30, the U.S. Department of Labor released its long-awaited proposal to narrow the overtime exemptions under the Fair Labor Standards Act. The changes, if adopted as proposed, will have a significant impact on the banking industry, particularly community banks. Comments on the proposal are due by September 4. Background The FLSA requires employees to be paid the federal minimum wage and overtime (at one-and one-half times their regular rate) for time worked in excess of 40 hours in a week. The law and DOL s implementing regulations provide exemptions from these requirements for certain groups of employees. The most commonly used exemption is for employees working in jobs that the FLSA describes as executive, administrative, or professional the so-called white collar exemptions (or the EAP exemptions as they are called in DOL s proposal). To qualify for these white collar or EAP exemptions, employees must be (1) paid on a salary basis; (2) receive a specified salary level set by DOL; and (3) perform executive, administrative, professional duties established by DOL (the duties tests). Similar requirements apply to employees covered by a computer exemption. The regulations also exempt highly compensated employees who customarily and regularly perform one of the exempt duties of an administrative, executive or professional employee, but who do not otherwise meet these duties tests. The current salary level for exemption from overtime was set by DOL in 2004 at $455/week. The salary level remains unchanged until DOL through notice and comment rulemaking changes it. Before 2004, the salary level had remained unchanged since Proposed Changes DOL is proposing to make the following key changes to the while collar exemptions: The salary level for the EAP and computer exemptions would rise from $455/week ($23,660) to potentially $970/week ($50,544/year) in The annual compensation level for highly compensated employees would rise from $100,000/year to $122,148 in These salary level requirements would be adjusted automatically each year. Surprisingly, no changes are proposed to the duties tests, but DOL seeks comment on them making it likely that a final rule will include changes. EAP Salary Level Requirement. Under the proposal, for individuals to be eligible for the executive, administrative, professional or computer exemption, employees must be paid a salary in 2016 that could be in the range of $970/week. This is a dramatic increase from the current salary level of $455 per week. The salary level in the proposal is based on Bureau of Labor Statistics data reflecting compensation paid to all full-time salaried employees nationwide and is pegged to the 40 th percentile of that data. The proposal cites 2013 BLS data that would have set the salary level at $921/week. The agency intends to use 1 st quarter 2016 BLS data or $50,544/year. ABA staff analysis does not provide, nor is it intended to substitute for, professional legal advice. 1

33 July 2015 Annual Salary Level Adjustment. The agency will review annually these national compensation figures, and the salary level will be adjusted each year to remain at the 40 th percentile level. DOL is also seeking comment on the use of Consumer Price Index as the basis for automatically updating the salary level rather than BLS data. DOL proposes to announce increases to the salary level, and those standards will become effective 60 days after that annual disclosure. Highly compensated Employees. The proposal would also increase the annual compensation level for individuals to qualify for the highly compensated employee exemption. That annual compensation level is currently at $100,000 per year, and the proposed regulations would increase that level to $122,148 per year in Under the proposal, the salary level required to qualify for the highly compensated employee exemption is set at the 90 th percentile of the BLS full-time salaried employee compensation figures nationally. This compensation level will also be adjusted annually, to remain consistently at the 90 th percentile. Inclusion of Non-discretionary Bonuses and Incentives. DOL is seeking comment on whether to include as a part of the salary level computation certain non-discretionary bonuses and incentives which may be paid as frequently as monthly. If adopted, the inclusion of such bonuses/incentives may mitigate a portion of the disruption that is sure to follow the implementation of a final rule. Duties Tests. The proposal does not include any immediate changes to the duties tests associated with the EAP exemptions. However, DOL has asked the public to comment on potential changes to the current duties test including: Should employees be required to spend a minimum amount of time performing work that is their primary duty in order to qualify for exemption? If so, what should that minimum amount be? Should the Department look to the State of California s law (requiring that 50 percent of an employee s time be spent exclusively on work that is the employee s primary duty) as a model? Is some other threshold that is less than 50 percent of an employee s time worked a better indicator of the realities of the workplace today? Does the single standard duties test for each exemption category appropriately distinguish between exempt and nonexempt employees? Should DOL reconsider its decision to eliminate the long/short duties tests structure? Is the concurrent duties regulation for executive employees (allowing the performance of both exempt and nonexempt duties concurrently) working appropriately or does it need to be modified to avoid sweeping nonexempt employees into the exemption? Alternatively, should there be a limitation on the amount of nonexempt work? To what extent are exempt lower-level executive employees performing nonexempt work? It is very possible that the final rule could include changes to the duties tests. Effective Date Timeframe. Because DOL expects to use 1 st 2016 data to set the new salary level requirement, we expect a final rule sometime in early spring of Although employers were given 120 days to implement the 2004 final rule changes, because the Administration wants the rule to be implemented before the 2016 elections, employers may have less time for implementation in Questions? Contact Cris Naser for more information. ABA staff analysis does not provide, nor is it intended to substitute for, professional legal advice. 2

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35 ANSWERS TO QUESTIONS FROM ABA S JULY 30 BRIEFING ON DOL S OVERTIME PROPOSAL Following are the answers to questions received during ABA s July 30 briefing on the Department of Labor s proposal to delimit the white collar exemptions under the Fair Labor Standards Act. The responses to the questions were provided by Steven Greene of Helms & Greene and Employment Law Compliance. This document is organized as follows: Background o Timing Salary Level Issues o Bonuses Possible Changes to the Duties Tests Compliance Issues o Fluctuating Work Week Pay Plan o Mortgage Loan Officers o Other Specific Positions o Conversion Issues I. BACKGROUND On June 30, the U.S Department of Labor released its long-awaited proposal to narrow the overtime exemptions under the Fair Labor Standards Act. The changes, if adopted as proposed, will have a significant impact on the banking industry, particularly community banks. Comments on the proposal are due by September 4. DOL is proposing to make the following key changes to the white collar exemptions: The salary level for the EAP and computer exemptions would rise from $455/week ($23,660/year) to potentially $970/week ($50,440/year) in The annual compensation level for highly compensated employees would rise from $100,000/year to $122,148 in These salary level requirements would be adjusted automatically each year. Surprisingly, no changes are proposed to the duties tests, but DOL seeks comment on them making it likely that a final rule could include changes. We expect the proposal to be finalized and effective in the first quarter of 2016, and the compliance period may be shorter than when the FLSA exemption regulations were changed in Bankers should prepare now to assess the impact of the proposal on their exempt positions. ABA has requested an extension of the comment deadline for an additional 60 days. We are part of the Partnership to Protect Workplace Opportunity, a broad coalition of trade groups. Bankers who would like to also request an extension of the comment deadline may do so on the PPWO website at Take action now. Watch for more information about developments with the proposal in ABA s Newsbytes or in ABA s e-bulletin: ABA Newsbytes Human Resources, available free to employees of ABA members banks. 1

36 A. Timing QUESTION 1: Since this is currently in the comment period, is there any expectation that there could be a compromise that makes the salary level somewhere in between the current level and the proposed levels or do you believe that it will be at least $921 per week? Answer: There is a possibly that the final regulations will have a salary level different from the proposed figure. The proposal actually anticipates a figure of $970 per week, with a $921 per week figure based upon in 2013 government wage data. While there is a possibility that the salary level would be lowered in the final rule, we do not believe that outcome is likely given all the surrounding circumstances. We believe the administration wants to significantly increase the percentage of nonexempt employees, and that is what this significant salary increase accomplishes. QUESTION 2: We re hearing that the regulation will not likely go into effect until April 2016 and that they will use 2015 #s, which will likely be higher than $50,440. Do you see this as a possibility? Answer: It possible that the new regulations will not go into effect until April, 2016, but it is equally possible that they will go into effect sooner. DOL has indicated in the proposed standards that they will likely use 2016 wage numbers. While the use of a different year is possible, we do not see that as likely. In the proposed regulations they outline the 2016 anticipated figures which gets us to the $50,440 annual salary figure. That sum is higher than the 40 th percentile figure based on 2015 data. QUESTION 3: How might the proposal around increasing federal minimum wage affect these proposals? Answer: The proposed overtime exemption changes are moving forward independently of political efforts to increase the federal minimum wage rate. We do not see a direct link between the two, but clearly the Obama administration is looking at increasing wage rates in a number of ways. QUESTION 4: Are you finding that most employers are waiting to adjust compensation until the final ruling is complete? Answer: Yes, most employers will wait to make adjustments until the effective date of the final regulations. We recommend that community banks get prepared for the necessary changes and carefully consider the right compliance approach for their organizations. However, implementation should wait until the effective date. II. SALARY LEVEL QUESTION 5: Is the expected salary level for 2016 $50,440 or $122,148? Answer: The expected salary level to qualify for the white collar exemption standards in 2016 is $970 per week, which annualizes to $50,440 per year. The regulations also will include an exemption for highly compensated employees, and this exemption has a relaxed duties test. To be considered eligible for the highly compensated employee exemption in 2016, we expect the total compensation for the individual would need to exceed $122,148 in We have two different exemption methodologies and thus two different figures. 2

37 QUESTION 6: Can a non exempt employee be salaried? If so, is there a standard that has to be met or can you pick and choose which one to pay a straight salary vs hourly or do they all have to be paid the same? Answer: Yes, a nonexempt employee can be paid on a salary basis. Organizations can determine which nonexempt employees would be paid a salary and which nonexempt employees would be paid an hourly rate. When individuals are converted from exempt to nonexempt status, one of the common criticisms is the fluctuation in earnings caused by the conversion to an hourly methodology. From a legal perspective, organizations can pay nonexempt employees with a salary or an hourly rate, but you do need think through the employee relations implications. QUESTION 7: Can you explain again how under the overtime approval policy there may be a time when we do not have to pay for overtime, if it was not approved? Answer: Under an overtime approval process, when an employee works time which is not approved, and the employer is aware of that time worked, the employer must pay for that time. The employee, however, can be subject to discipline for performing that unapproved overtime in violation of the employer s policy. If an employee works unapproved overtime and it is not known by the organization, then there is no obligation to pay for that time. Moreover, in litigation on that issue, employees later claiming that they worked overtime in violation of an approval policy, have been denied the recovery of any later claimed overtime compensation. So in a nutshell, if you know overtime was worked even in violation of an overtime approval process, it does need to be paid. However, if you do not know that the time was worked and it is later claimed by an individual, then the employee is foreclosed from recovering back wages for this time if claimed in the future. A. Bonuses QUESTION 8: Please explain more deeply the differences between, commissions, bonus or incentive. Answer: The proposed regulations do not contain specific definitions for these three terms, and we find that problematic because there is some real overlap in those three terms. We will need to see how this handled in the final regulations, and we will be looking for DOL to provide its definition of these terms. QUESTION 9: When you say credit, does that mean that DOL would add the bonus to the salary and if it was over the required level, then they can be considered non-exempt? Answer: Yes, with respect to DOL s questions about a non-discretionary bonus, DOL would add the bonus to the salary to see if the total exceeded the $970 per week standard. If it did, then the employee would be considered exempt from overtime payment if they satisfied the duties test. Keep in mind that it is likely that there would be significant limitations on the eligibility of such bonuses as part of the calculation of the salary test. QUESTION 10: What defines a non-discretionary bonus? Answer: A non-discretionary bonus is defined in DOL regulations with respect to determining the proper overtime payments to nonexempt employees. Nondiscretionary bonuses essentially are bonus payments where employees know in advance (1) that they may be eligible to receive an additional payment and (2) the type of conduct or results necessary to earn that bonus. 3

38 QUESTION 11: What about discretionary bonuses? Answer: Based upon the proposed regulations, discretionary bonuses will not be considered as a credit towards the salary payment. The proposed regulations do draw that distinction. QUESTION 12: Is an overtime payment defined as "total comp" for purposes of awarding end of year bonuses, life insurance calculations, profit sharing? Answer: Whether overtime payments need to be factored into your employee benefit plans will depend upon the terminology in those specific benefit plans. QUESTION 13: So if we currently pay our branch managers a commission for loans closed and they know exactly how they earn those commissions, couldn't we just rename commissions "non-discretionary bonus"? Answer: Yes, you could rename the commission as a nondiscretionary bonus, and line-up with the thinking in the proposed regulations. This demonstrates that these terms are very poorly defined (commission, bonus, and incentive). We will need to see how DOL addresses this in the final regulations, III. DUTIES TESTS QUESTION 14: All of our Mortgage Loan Officers, Consumer Lenders and Commercial Lenders are currently salaried Exempt but above the proposed minimum threshold. Do they still all need to satisfy the Duties test? If so, and did not satisfy the duties test would they have to be converted to non-exempt hourly pay status? Tracking time hourly? Answer: Lenders that receive salaries above the proposed minimum threshold still will need to satisfy one of the exemption duties tests in order to qualify for an exemption from overtime. If the lenders do not satisfy one of the duties tests, then they would need to be converted to nonexempt status, and they would need to track their hours worked. The employees would not necessarily need to be converted to hourly status, as you could continue to pay them a salary. However, even if they are paid a salary, they will be required to track their time and the bank will be required to pay overtime compensation when the employee works more than 40 hours in a week. Commercial lenders will likely satisfy the administrative exemption duties test, MLOs and consumer lenders will not. QUESTION 15: Is it recommended that those "exempt" employees that fall under the annual threshold of 50,440 and will remain exempt by meeting the duties test, be required to punch a clock in order to pay them the correct OT hours worked? Answer: Under the proposed standards, since the employees are paid less than the proposed salary level, they will need to be treated as nonexempt. They will need to maintain a record of hours worked, and overtime will need to be paid as appropriate. QUESTION 16: If you have an employee that is in training to do exempt duties, can you classify them as exempt initially or wait until fully functioning in that role? Answer: During the time period an employee is training to assume an exempt role, the employee is considered nonexempt by DOL. Once they are fully capable of performing the exempt role, then typically you could convert them to exempt status. 4