Exempt vs. Nonexempt:
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1 Exempt vs. Nonexempt: Understanding FLSA s Employee Classification Standards Presented by Don Feltham
2 FLSA» 2013 marked the 75th anniversary of the enactment.» Exempt vs. nonexempt» Twists on the issues» Be mindful of where you re located.» Get advice and guidance for quirky issues.
3 OVERVIEW The FLSA: 1. Established a minimum wage 1938
4 10 STATES With Minimum Wages Linked to Consumer Price Index
5 OVERVIEW The FLSA: 1. Established a minimum wage 2. Made it more expensive for employers to work employees long hours rather than bringing people off the unemployment lines 1938
6 OVERTIME California, Alaska, Nevada, Puerto Rico, and the U.S. Virgin Islands require overtime for work > 8 hours per day.
7 OVERVIEW The FLSA: 1. Established a minimum wage 2. Made it more expensive for employers to work employees long hours rather than bringing people off the unemployment lines Prohibited long working hours for children younger than 18
8 Equal Pay Act 1978
9 1. Interstate motor carrier, airline, and railroad employees 2. Outside buyers of poultry and dairy products 3. Seamen 4. Motor-vehicle dealer sales and service personnel 5. Trailer, boat, or aircraft dealer salespeople not working for a manufacturer 6. Certain local delivery drivers and helpers 7. Agricultural employees 8. Individuals engaged in the initial transportation of fruits and vegetables from a farm 9. Taxi drivers 10. Employees of police and fire departments with fewer than 5 employees 11. Movie-theater employees XEMPTION
10 Certain employees of amusement or recreational establishments located in national parks Bulk or wholesale petroleum distributors Employees receiving literacy training up to 10 hours per week Hospital or nursing-home employees if paid overtime for more than 8 hours per day or 80 hours during a 14-day period Public fire protection personnel may be paid for a consecutive 28-day work period after 212 hours of work. Law enforcement may be paid overtime for a consecutive 28- day work period after 171 hours of work. PARTIAL EXEMPTION
11 Tests Individual coverage
12 Tests Enterprise coverage
13 Changes Made by the 2004 DOL» Elimination of the Long and Short Tests» Updated salary requirements» Elimination of the 20% nonexempt work limitation» Full-day docking for serious disciplinary reasons» Separation of the professional exemption into learned and creative categories» Addition of a highly compensated exemption
14 Categories of Exemption Salary test Primary duties test Managers, directors, executives, officers, etc. 1. Executive
15 Categories of Exemption Salary test Primary duties test 2. Administrative
16 1. Whether the employee has the authority to formulate, affect, interpret, or implement management policies 2. Whether the employee carries out major assignments 3. Whether the employee s work substantially affects business operations 4. Whether the employee has authority to financially commit the employer 5. Whether the employee has authority to waive or deviate from policies 6. Whether the employee has the authority to bind the company Factors to Consider
17 7. Whether the employee provides consultation to management 8. Whether the employee is involved in planning business objectives 9. Whether the employee investigates and resolves matters of significance on behalf of management 10.Whether the employee represents the company in handling complaints Factors to Consider
18 EXEMPT NONEXEMPT GRAY AREA Senior administrative Entry-level clerical administrative
19 Categories of Exemption Salary test Primary duties test 3. Professional (Learned)
20 Categories of Exemption Salary test Primary duties test 3. Professional (Creative)
21 Categories of Exemption Salary test Primary duties test 4. Computer-Related
22 Categories of Exemption Salary test Primary duties test 5. Outside Sales
23 Categories of Exemption Salary test Primary duties test 6. Highly Compensated
24 Compensating Exempt Employees
25 Docking Exempt Employee Pay EXCEPTIONS:» Personal absences» Sickness or disability» Serious disciplinary reasons» Life-threatening safety violations» Commencement of FMLA leave» Joining or leaving the work force midweek
26 Full-week docking is acceptable for:» Jury or subpoenaed witness duty» Military service» Work-site closings resulting from weather or mechanical failures SICK TIME
27 DOL has interpreted employees as working when checking and/or voice mail outside the office.
28 168-hour workweek $7.25 per hour 7 Basic Rules for Nonexempt Employee Classification 1. Minimum wage and overtime requirements
29 7 Basic Rules for Nonexempt Employee Classification 2. Compensatory time off (private sector)
30 It must be voluntary. It must be accrued at timeand-one-half. 240 hours for nonemergency personnel, and 480 hours for emergency personnel Excess paid in cash 7 Basic Rules for Nonexempt Employee Classification 3. Compensatory time off (public sector)
31 7-minute rounding 7 Basic Rules for Nonexempt Employee Classification 4. Rounding starting and stopping times
32 Minimum of $2.13 per hour Minimum of $7.25 per hour including tips 7 Basic Rules for Nonexempt Employee Classification 5. Tip credits
33 7 Basic Rules for Nonexempt Employee Classification 6. Discretionary vs. nondiscretionary bonuses
34 7. Record-keeping requirements 7 Basic Rules for Nonexempt Employee Classification
35 Nonexempt Employees 1. Unauthorized overtime
36 Nonexempt Employees 2. Preliminary and postliminary work
37 Nonexempt Employees 3. Waiting, on-call, and standby time
38 Nonexempt Employees 4. Meal and rest periods State requirements available at
39 Nonexempt Employees 5. Sleeping time Uninterrupted sleep for at least 5 hours
40 Nonexempt Employees 6. Training and education time 4 Criteria: 1. Outside of normal work hours 2. Voluntary participation 3. Not job-related 4. No work is performed concurrently
41 Nonexempt Employees 7. Travel time
42 FLSA ISSUES IN THE NEWS AND COURTS In 2008:» 23,000 complaints received» Back wages of $185,000,000 for over 228,000 employees» WHD assessed over $9.9 million in penalties for violations» Average of 97 days to resolve a case» New screening processes
43 1. Minimum wage for federal contractors 2. Minimum wage 3. Living wage actions by municipalities 4. Focus on low-wage industries 5. Independent contractors 6. Use and payment of interns 7. Pay equity 8. Obama s directive to DOL regarding exemptions EMERGING ISSUES
44 Get an expert s advice. Attorney Consultant DOL Take a conservative perspective.
45 » Examine positions.» Examine PTO policies.» Understand differences among state and local rules. Where do you go from here?
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