OHIO ASSOCIATION OF COMMUNITY HEALTH CENTERS

Transcription

1 OHIO ASSOCIATION OF COMMUNITY HEALTH CENTERS NEW OVERTIME REGULATIONS JUNE 9, Daphne K. Saneholtz, Esq. Amanda L. Waesch, Esq. Brennan, Manna & Diamond, LLC dksaneholtz@bmdllc.com / (614) alwaesch@bmdllc.com / (330)

2 TOPICS Wage and Hour Basics FLSA Coverage Overtime Basics Final Overtime Rule White Collar Exemptions Independent Contractors Joint Employers Looking Forward Options & Recommendations for Employers 2

3 3 WAGE AND HOUR BASICS

4 WAGE AND HOUR LAW Wage and hour laws generally govern: Minimum wages. Maximum hours. Overtime compensation. Child labor. Equal pay. Payroll requirements. 4 Recordkeeping.

5 FEDERAL LAW OR STATE LAW? Follow both. Federal law (the FLSA) will generally supersede state law except where the state law provides a more generous benefit to employees. The state laws do not supersede the federal laws in total, only where the laws conflict. For example, if the state minimum wage rate is more than the federal rate of $7.25 per hour, then employers are required to follow the state minimum wage rate. 5

6 6 FLSA COVERAGE

7 FEDERAL LAW: FLSA Federal Fair Labor Standards Act (FLSA): Administered by the Wage and Hour Division (WHD) of the US Department of Labor (DOL). Coverage: Enterprise or Individual. 7

8 FEDERAL LAW: FLSA Federal Fair Labor Standards Act (FLSA): Enterprise Coverage: All employees of a covered enterprise are subject to FLSA requirements. A covered enterprise is an enterprise with an annual gross volume of sales made or business done of $500,000+ or employees of hospitals, businesses providing medical or nursing care for residents, schools, and public agencies regardless of sales. 8

9 FEDERAL LAW: FLSA Federal Fair Labor Standards Act (FLSA): Enterprise Coverage Non-Profits: Income that a non-profit receives in furtherance of charitable activities is not factored into the $500,000 threshold. Income in furtherance of charitable activities include contributions, grants, membership fees, donations and dues. Charitable activities are normally provided free of charge or for a token value. Ordinary commercial activities of a non-profit, such as operating a gift shop, thrift store, or selling cookies, do apply towards the $500,000 threshold. 9

10 FEDERAL LAW: FLSA Federal Fair Labor Standards Act (FLSA): Enterprise Coverage Non-Profits: Example 1: A non-profit animal shelter provides free veterinary care, animal adoption services, and shelter for homeless animals. Even if the shelter takes in over $500,000 in donations in a given year, because the shelter engages only in charitable activities that do not have a business purpose, employees of the animal shelter are not covered on an enterprise basis. 10

11 FEDERAL LAW: FLSA Federal Fair Labor Standards Act (FLSA): Enterprise Coverage Non-Profits: Example 2: A non-profit organization operates a thrift store in which its employees sell donated items. The thrift store is engaged in commercial activity by selling goods. If the thrift store on its own generates revenue of at least $500,000 in a year, the non-profit s employees are protected by the FLSA on an enterprise basis and are entitled to minimum wage and overtime protection unless a specific exemption applies. 11

12 FEDERAL LAW: FLSA Federal Fair Labor Standards Act (FLSA): Individual Coverage: Even if the enterprise is not covered, individual employees within the enterprise may be individually covered under the FLSA. Individual employee coverage is based on the nature of the particular employee s work activities. An employee who engages in interstate commerce or in the production of goods for interstate commerce is covered by the FLSA. 12

13 FEDERAL LAW: FLSA Federal Fair Labor Standards Act (FLSA): Individual Coverage: Employees whose work involves or relates to the movement of persons or things across state lines are also considered engaged in interstate commerce. Such activities include: making out-of-state phone calls; receiving/sending interstate mail or electronic communications; ordering or receiving goods from an out-of-state supplier; and handling credit card transactions or performing the accounting or bookkeeping for such activities These activities must be performed regularly and not on just isolated occasions. 13

14 FEDERAL LAW: FLSA Federal Fair Labor Standards Act (FLSA): Individual Coverage: Example 1: An employee works at a homeless shelter that regularly receives food and clothing donations from corporations located across state borders. The employee s job duties consist of receiving and logging these donations. The employee is individually covered by the FLSA and entitled to its protections, including receiving minimum wage and overtime unless a specific exemption applies. 14

15 FEDERAL LAW: FLSA Federal Fair Labor Standards Act (FLSA): Individual Coverage: Example 2: An employee works at a shelter for domestic violence victims. The employee does not regularly use the telephone or computer for interstate communications and works only with clients from within the state. Because the employee is not engaged in substantial levels of activities involving interstate commerce, the employee is not covered by the FLSA on an individual basis. 15

16 16 OVERTIME BASICS

17 OVERTIME Pay one and one-half the employee s wage rate for hours worked over 40 in a pre-established work week, consisting of not more than seven consecutive days. You do not need to pay overtime simply because an employee works on a Saturday, Sunday, or holiday. The difficulty with overtime is not necessarily when to pay it but to whom you should pay it. 17

18 OVERTIME FLSA regulations require an employer who knows, has reason to believe, or should have discovered through reasonable diligence an employee is working overtime, to pay the employee even if: The employee was not requested to work overtime; or The employee was prohibited from working overtime. 18

19 OVERTIME Employers do not violate the FLSA when: They have no knowledge that an employee is working overtime; and The employee fails to notify, or deliberately prevents the employer, from finding out about the employee s overtime hours. 19

20 EXEMPTIONS TO OVERTIME REQUIREMENTS If the requirements of exemptions are met, the employer is not required to pay overtime to the exempt employee. The Final Rule affects White Collar exemptions; which will be discussed in depth. 20

21 21 FINAL OVERTIME REGULATIONS

22 THE FINAL RULE: BACKGROUND In 2014, President Obama directed the DOL to update the minimum salary threshold required for exemption to reflect inflation Last updated in 2004 to $455 per week DOL received over 270,000 public comments in response to the proposed increase and its associated regulations This change will extend the right to overtime pay to about 4.2 million currently exempt workers 22

23 THE FINAL RULE: REASONING Puts more money into the middle class and gives middle class workers more free time Prevents erosion of overtime protection and ensures predictability for employers and employees Improves work-life balance Spreading the work will increase employment Increase workers health and productivity 23

24 THE FINAL RULE Raises the minimum salary required for specific white collar exemptions from $455 per week to $913 per week ($23,660 to $47,476 per year). Set at the 40 th percentile of earnings of full-time salaried workers in the lowest-wage Census Region. Highly compensated employee (HCE) exempt salary increased from $100,000 to $134,004 (90 th percentile of full-time salaried workers). Effective December 1, Minimum salary level will be reassessed every three years (beginning Jan. 1, 2020). 24

25 THE FINAL RULE Automatic adjustments based on wage index. Indexed to wages (40% / 90%). Unprecedented on federal level. Wage index skews salary level because it: includes employees not covered by rule (for example, federal employees); and includes employees not subject to salary level test (for example, doctors, lawyers, and teachers). Wage index may result in future upward shift in threshold because: current exempt employees may be given raises to avoid salary compression; those converted to salary non-exempt may have increased earnings due to overtime pay; and those re-classified to hourly will be excluded from data. 25

26 26 WHITE COLLAR EXEMPTION

27 WHITE COLLAR EXEMPTIONS The new FLSA Final Rule is applicable to White Collar Exemptions, specifically those for: Executive Employees Administrative Employees Professional Employees Certain Outside Sales and Computer Employees Highly Compensated Employees 27

28 WHITE COLLAR EXEMPTIONS To qualify for exemption, employees must meet three tests for each exemption: An exempt employee must earn a minimum amount (revised). The minimum amount must be paid on a salary basis (no change). The exempt employee must perform certain executive, administrative, professional, outside sales, or computer professional job duties (no change). 28

29 SALARY BASIS TEST 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 29

30 SALARY WHAT IS INCLUDED? Final Rule: Commissions and incentives can be used to satisfy up to 10% ($91 per week or $4, annually) of the final salary requirement Non-discretionary bonuses, commissions, or other incentive payments must be paid on a quarterly or more frequent basis Does not apply to HCEs because employers are already permitted to satisfy almost two-thirds of their compensation with non-discretionary payments HCEs must be paid a weekly salary of at least $913 but the rest of the compensation can come from commissions, nondiscretionary bonuses, and other nondiscretionary compensation Employers can make catch-up payments 30

31 CATCH-UP PAYMENTS Employers can make catch-up payments when the sum of the non-discretionary bonuses + actual weekly salary does not equal $913 per week Up to 10% of the standard salary level for the preceding 13 week period Catch-up payments must be made by the next pay period after the end of a quarter Catch-up payments will only count toward the prior quarter s salary amount Not towards the quarter it is paid If the catch-up payment is not paid, the employee is entitled to overtime pay for any overtime hours worked during the applicable quarter 31

32 DUTIES TEST The Final Rule does not change the duties test : The exempt employee must perform certain executive, administrative, professional, outside sales, or computer professional job duties. However, more employees will be entitled to overtime pay simply because of their salaries so this test will be applied less often 32

33 EXECUTIVE EMPLOYEE DUTIES Primary duty is management of the enterprise or of a customarily recognized department or subdivision Customarily and regularly directs the work of at least two or more other employees Authority to hire or fire other employees or recommendations as to the hiring, firing, advancement, promotion or other change of status of other employees given particular weight 33

34 20% OWNER EXECUTIVES The executive exemption also includes employees who own at least a bona fide 20-percent equity interest in the enterprise are actively engaged in management of the enterprise The salary minimum and salary basis requirements do not apply to exempt 20% equity owners 34

35 ADMINISTRATIVE EMPLOYEE DUTIES Primary duty is the performance of office or nonmanual work directly related to the management or general business operations of the employer or the employer s customers Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance 35

36 MANAGEMENT OR GENERAL BUSINESS OPERATIONS Tax Finance Accounting Budgeting Auditing Insurance Quality Control Purchasing Procurement Advertising Marketing Research Safety and Health Human Resources Employee Benefits Labor Relations Public and Government Relations Legal and Regulatory Compliance Computer Network, Internet, and Database Administration 36

37 PROFESSIONAL EMPLOYEE DUTIES Learned Professionals: Primary duty is the performance of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction. RNs (but not LPNs), social workers, PAs Creative Professionals: Primary duty is the performance of work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor. 37

38 PROFESSIONAL EMPLOYEE DUTIES Teachers: Primary duty is teaching, tutoring, instructing, or lecturing in the activity of imparting knowledge within an educational establishment. Law or Medicine: Employee must hold a valid license or certificate permitting the practice of law or medicine and must be actually engaged in this practice. *These professionals do not have salary minimum or salary basis requirements and are always considered exempt. 38

39 FIELD OF SCIENCE OR LEARNING Occupations with recognized professional status, as distinguished from the mechanical arts or skilled trades Law Theology Medicine Pharmacy Accounting Teaching Architecture Engineering Physical Sciences Chemical Sciences Biological Sciences Actuarial Computation 39

40 COMMON NONEXEMPT PROFESSIONS Licensed practical nurses Accounting clerks and bookkeepers who normally perform a great deal of routine work Cooks who perform predominantly routine work Paralegals and legal assistants Engineering technicians 40

41 RECOGNIZED FIELD OF ARTISTIC OR CREATIVE ENDEAVOR 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 41

42 OUTSIDE SALES EMPLOYEES Primary duty is: Making sales; or Obtaining orders or contracts for services or facilities for consideration paid by customer; and Customarily and regularly engaged away from the employer s place(s) of business in performing such primary duty. 42

43 COMPUTER EMPLOYEES Employees who qualify for this exemption work in computer systems analysis, programming, or related work. Primary duty is: The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications; The design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; The design, documentation, testing, creation, or modification of computer programs related to machine operating systems; or A combination of the above requiring the same level of skills. 43

44 HIGHLY COMPENSATED EMPLOYEES Employees with total annual compensation of at least $134,004 are exempt from FLSA overtime requirements, if they both: Perform office or nonmanual work. Customarily and regularly perform any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee. 44

45 OPTIONS FOR EMPLOYERS In order to comply with the new FLSA Final Rule, employers could: Increase salary of employees who meet the duties test to the new minimum level to retain exempt status. Pay an overtime premium for any overtime hours worked. Reduce or eliminate overtime hours. Reduce amount of pay allocated to base salary (but not below minimum wage) and add pay to account for overtime hours worked over 40 in the workweek to hold weekly pay constant. Any combination of the above. 45

46 EXAMPLE #1 Erica, an operations manager at an international non-profit organization, is paid a salary of $45,000 a year but regularly works overtime in order to direct business operations in multiple time zones. Erica s job duties qualify her for the administrative exemption. Erica s employer may choose to raise her salary to or above the $47,476 a year to maintain her administrative exemption. 46

47 EXAMPLE #2 Jeff, a development manager, earns a salary of $41,600 per year ($800 per week) for a 40 hour workweek $ hours = $20 per hour Because Jeff makes less than $913 per week he is eligible for overtime payments. If Jeff does not regularly work overtime, his employer may choose to keep his current salary and just pay overtime if necessary. If Jeff works 45 hours in one week, for example, his employer would owe him: $20 per hour x 1.5 x 5 hours = $150 overtime pay $800 + $150 = $950 pay for that week 47

48 EXAMPLE #3 Jamie, an HR manager at a community loan fund, earns a fixed salary of $44,200 per year ($850 per week) for a 50 hour workweek. Her salary does not include an overtime premium. Jamie s regular rate would be $ or $17. In a normal workweek, Jamie s employer would pay her the additional half time overtime premium for 10 hours of overtime ($17 2 = $8.50 per hour). If Jamie worked more than 50 hours in a week, her employer would also owe her time and a half at the regular rate ($17 x 1.5 = $25.50) for those overtime hours beyond 50 hours. 48

49 49 INDEPENDENT CONTRACTORS

50 DOL MEMO RE INDEPENDENT CONTRACTORS July 15, 2015 DOL Administrator published a memo re classification of independent contractors. DOL published a 6-factor Economic Realities Test. IRS has 3-factor test. Broad definition of employee. Very fact-specific analysis. DOL ramping up investigations and enforcement actions. 50

51 ECONOMICS REALITIES TEST Economic Realities Test: Is the work an integral part of the employer s business? Does the worker s managerial skill affect the worker s opportunity for profit or loss? How does the worker s relative investment compare to the employer s investment? Does the work performed required special skill and initiative? Look at business skills, judgment, and initiative (NOT technical skills). Is the relationship permanent or indefinite? What is the nature and degree of the employer s control? 51

52 NLRB JOINT EMPLOYER RULING 52

53 NLRB JOINT EMPLOYER RULING Revised the prior standard, which depended whether the company retained sufficient control over the terms and conditions of employment of the workers and directly and immediately exercised such control. Impact on temporary staffing agencies and employers who utilize them. After the Browning-Ferris decision, the standard no longer requires actually exercising authority to control, but rather whether the company has the potential to exercise such control. Both employers are liable for compliance with all laws, rules, and regulations. Review contracts to identify areas where control over essential terms and conditions of employment have been retained. Contractual negotiations to determine terms and conditions are essential. Centralized contracting authority and model terms and conditions. 53

54 54 LOOKING FORWARD

55 LOOKING FORWARD - DOL The DOL estimates that average annualized direct employer costs will total approximately $295 million per year over the first 10 years. The average transfer of income from employers to employees for newly overtime-eligible workers are estimated to be approximately $1.2 billion per year over the first 10 years. 55

56 LOOKING FORWARD EMPLOYEE IMPACT Exempt Employees: longer hours: more duties; and salary compression. Non-Exempt (Reclassified) Employees: less training, mentoring, and education; less flexibility and more restrictions; and less full-time and more part-time New Hiring Dampened. 56

57 LOOKING FORWARD There may be Congressional actions or litigation to delay the implementation of the new salary levels. However, businesses should move forward as if the Final Rule will become effective on Dec. 1, Anticipate more minimum annual salary increases every three years beginning Jan. 1, DOL estimates that the salary threshold will reach $984 per week ($51,158 per year; $147, 524 for HCEs) by this time. 57

58 RECOMMENDATIONS FOR COMPLIANCE 58

59 FLSA CONSIDERATIONS Employers may reorganize workloads or adjust schedules in order to reduce overtime hours. Example: If an employee regularly has work duties from 4-6pm, adjust their schedule so that they start at 10am rather than 8am every day. Employers may hire new employees to spread the workload and reduce overtime hours. Tracking time will be important. 59

60 KEY TAKEAWAYS Think about how these changes impact your organization Identify a work group to assist with FLSA compliance Review your employee classifications and your compliance with wage and hour laws; make changes if necessary Review your employee handbook and policies and procedures; make changes if necessary Perform annual assessments Budget for changes Review existing independent contractor relationships Have a policy in place Develop a model independent contractor Agreement Identify a point person for outside contracts Review existing potential joint employer relationships Review compliance with applicable laws Develop model terms and conditions Identify a point person for these relationships 60

61 OHIO ASSOCIATION OF COMMUNITY HEALTH CENTERS NEW OVERTIME REGULATIONS QUESTIONS? 61 Daphne K. Saneholtz, Esq. Amanda L. Waesch, Esq. Brennan, Manna & Diamond, LLC / (614) / (330)