Exempt/Nonexempt? Where We re Headed & How to Get There Securely?

Transcription

1 Exempt/Nonexempt? Where We re Headed & How to Get There Securely?

2 Presented By Tammy McCutchen Washington D.C

3 Remember the 2016 Final Rule? Minimum salary level increased to $913/week. Automatic salary level increases every three years, beginning January 1,

4 The Injunction On November 22, 2016, the District Court (E.D. Texas) granted a preliminary injunction The court found that the high minimum salary violated Congressional intent because it denied exemption to millions of employees who actually performed executive, administrative or professional duties. DOL immediately appealed to the Fifth Circuit Court of Appeals 4

5 The Appeal DOL initially sought and was granted expedited review by the Fifth Circuit After inauguration, the new Administration sought and obtained a delay until June 30th to file its final brief In its reply brief, DOL asked the 5th Circuit to reaffirm it has authority to adopt a minimum salary test, but asked the court not to rule on the appropriateness of a $913 level Oral arguments were set for October 2 5

6 The August Surprise On August 31st, the District Court granted summary judgment, permanently enjoining the rule The court reaffirmed DOL s authority to set a minimum salary level But found that the $913 level exceeded DOL s authority and ignored Congressional intent by making overtime status depend predominately on a minimum salary level, thereby supplanting an analysis of an employee's job duties. 6

7 Status of the Litigation? The Fifth Circuit dismissed DOL s appeal of the preliminary injunction as moot DOL has until Halloween to appeal the District Court s grant of summary judgment and the permanent injunction. Is the 2016 Final Rule finally dead? 7

8 Meanwhile, Inside the Beltway DOL issued a Request for Information (RFI) on the overtime regulations Comments were due by September 25th. 8

9 The RFI In anticipation of complying with the 2016 Final Rule, did employers: Increase salaries or reclassify? Decrease hours of newly non-exempt employees? Convert worker pay from salaries to hourly wages? Change effective hourly rates so total comp remain the same? Make changes to workplace policies (e.g., working from home, travel time, smart phones)? 9

10 How Did Employers React? Did your organization take any steps to implement the 2016 Final Rule before it was enjoined? 10.57% Yes, we implemented changes to comply with the 2016 Final Rule 39.37% 50.06% We made plans to comply with the 2016 Final Rule, but did not implement those plans No 10 10

11 How Did Employers React? Increase salaries of exempt employees to retain their exempt status Increase salaries of exempt employees in order to retain their exempt status, but also reduce benefits, such as health care or auto or phone allowances, to minimize costs associated with the salary changes Reclassify employees to non-exempt (overtime eligible) Replace employees with automated alternatives or otherwise reduce headcount All Small Business Nonprofit South Healthcare Retail 76.42% 53.41% 75.38% 73.54% 64.00% 75.90% 7.21% 11.36% 6.92% 9.52% 6.00% 6.02% 77.39% 61.36% 81.54% 79.89% 80.67% 81.93% 6.38% 15.91% 4.62% 8.99% 8.00% 4.82% Raise prices for customers 11.51% 27.27% 3.85% 14.29% 18.67% 22.89% Limit the flexibility for employees to work alternative hours or at home Limit the use of or other technologies by non-exempt employees outside the workplace Limit the ability of non-exempt employees to travel for work 21.22% 40.91% 21.54% 20.11% 26.67% 19.28% 29.40% 32.95% 33.08% 29.10% 26.67% 33.73% 15.81% 22.73% 18.46% 12.17% 16.00% 22.89% 11

12 How Did Employers React? Allow them to work the same number of hours and earn overtime compensation without restriction? Convert them from salaried to hourly pay? Reduce their effective hourly rate so that their total pay remained the same? Require them to track and record work hours? Decrease their work hours to 40 hours or less? Change their status for benefit plans, resulting in less favorable benefits (e.g., paid leave, retirement, insurance benefits)? All Small Business Nonprofit South Healthcare Retail 28.72% 18.52% 20.41% 25.40% 18.52% 31.03% 73.14% 75.93% 81.63% 78.57% 79.63% 75.86% 18.60% 31.48% 11.22% 21.43% 13.89% 41.38% 72.31% 75.93% 76.53% 73.81% 75.93% 70.69% 34.09% 53.70% 44.90% 44.44% 47.22% 24.14% 7.02% 9.26% 8.16% 9.52% 8.33% 6.90% Reduce bonuses or commissions? 12.40% 27.78% 8.16% 16.67% 11.11% 17.24% Change their status to be included in a collective bargaining unit? 0.21% 1.85% 0.00% 0.00% 0.00% 0.00% Make other changes 14.05% 14.81% 16.33% 15.08% 12.04% 22.41% Make no changes 7.23% 11.11% 5.10% 5.56% 6.48% 5.17% 12

13 The RFI Should DOL: Set the minimum salary level by inflation or using the 2004 methodology? If DOL uses either of these methods, would changes to the duties tests be necessary? Set multiple salary levels by geography, size of business, or by exemption? Provide for automatic updates to the salary level? Adopt a duties-only test? 13

14 Comments on the RFI By the numbers: 157,587 total 139,297 regulations.gov 134,226 identical comments from employee advocate websites 5,071 non-duplicative comments Less than 200 with attachments Employer comments: Most support a modest increase to the minimum salary level, using the 2004 methodology, and no changes to the duties tests Few supported multiple salary levels, duties-only tests or automatic updates to the salary level

15 What Should the Salary Level Be? Increase current minimum salary level by level by inflation: $588 per week $30,576 annualized Applying 2004 methodology $612 per week $31,824 annualized 15

16 What s Next? DOL needs to review the RFI comments, which could take several months The next step in the regulatory process is for DOL to publish a Notice of Proposed Rulemaking The NPRM could be published this year, followed by a 60 to 90 day comment period DOL is unlikely to publish Final Rule this year 16

17 Predictions DOL will not appeal the District Court s grant of summary judgment and permanent injunction DOL will publish an NPRM by the end of the year and a new final rule by mid-2018 DOL will adopt a modest increase to the minimum salary level and highly compensated level Employers should continue to prioritize compliance, and be ready to dust off and update plans made to comply with the 2016 Final Rule 17

18

19 This information provided by Littler is not a substitute for experienced legal counsel and does not provide legal advice or attempt to address the numerous factual issues that inevitably arise in any employment-related dispute. Although this information attempts to cover some major recent developments, it is not all-inclusive, and the current status of any decision or principle of law should be verified by counsel.