Implementing Overtime Rule Changes. Presented by: Assistant Attorney General Daniel Knox Faulkner

Transcription

1 Implementing Overtime Rule Changes Presented by: Assistant Attorney General Daniel Knox Faulkner

2 General Rule/Overtime Pay Non-exempt employees must receive overtime pay at a rate of not less than 1 ½ times their regular rate of pay for hours worked in excess of 40 hours in any workweek

3 Overtime Pay Overtime pay cannot be waived by agreement A policy that no OT will be authorized or must be authorized in advance will not shield an employer if OT is actually worked Workweeks may not be averaged and each workweek stands by itself Based on hours actually worked in a workweek

4 Exclusions and Exemptions Generally Federal and State Exemptions Minimum Wage and Overtime Exemptions White Collar/541 Exemptions Overtime Only Exemptions Partial Overtime Exemptions

5 Three Tests for White Collar/541 Exemptions Salary Level Test (CHANGES COMING 12/1/16) Salary Basis Test Job Duties Test

6 Salary Level Test until 12/1/16 For most employees, the minimum salary required for exemption: Weekly $455 Annually $23,660 There are special rules for highly compensated employees who make at least $100,000 per year

7 Salary Level Test Beginning 12/1/16 (USDL Regulation Change) For most employees, the minimum salary required for exemption: Weekly $913 Annually $47,476 There are special rules for highly compensated employees who make at least $134,004 per year Automatic increases to salary level every three years Based on 40 th /90 th percentiles

8 Salary Basis Test Regularly receives each pay period a predetermined amount of compensation The compensation cannot be reduced because of variations in the quality or quantity of work An employee does not have to be paid for any workweek in which no work is performed No pay docking

9 No Salary Requirements The salary level and salary basis tests do not apply to Outside sales employees Doctors Lawyers Teachers Certain computer-related occupations paid at least $27.63 per hour 20% equity owners

10 White Collar/541 Exemptions Employees employed in a bona fide: Administrative Executive Professional or Outside sales capacity Certain computer employees

11 Job Duties Test - Executives Primary duty is management of the enterprise or a customarily recognized department or subdivision Customarily and regularly directs the work of 2 or more other employees Authority to hire or fire or whose recommendations as to hiring, firing, promotion, or demotion are given particular weight

12 Management Duties Interviewing, selecting and training Setting and adjusting pay and hours worked Directing the work of others Maintaining production or sales records Appraising employee productivity and efficiency

13 Management Duties Disciplining employees Planning work and work techniques Apportioning work among employees Determining the type of materials, supplies, machinery, equipment or tools to be used Determining merchandise to be bought, stocked and sold

14 Management Duties Providing for the safety and security of employees or property Planning and controlling the budget Monitoring or implementing legal compliance methods

15 Concurrent Duties Concurrent performance of exempt and nonexempt work does not disqualify an employee from the executive exemption Time spent performing exempt or nonexempt work is not a sole test

16 Concurrent Duties Generally, exempt executives make the decision when to perform nonexempt work and remain responsible for the business operations under their management Generally, nonexempt employees are directed to perform exempt work or to do so for a defined time

17 Job Duties Test - Administrators 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; and Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance

18 Management or General Business Operations Tax Finance Accounting Budgeting Auditing Insurance Quality control Purchasing Legal Advertising Marketing Research Safety & health Human resources Public relations Government relations Labor relations Information technology

19 Discretion and Independent Judgment Involves the comparison and evaluation of possible courses of conduct and acting or making a decision Implies that the employee has the authority to make an independent choice, free from immediate supervision Decisions or recommendations may be reviewed at a higher level and upon occasion revised or reversed

20 Administrative Exemption Examples Human resources HR manager who formulates, interprets or implements employment policies generally meets the administrative duties test Personnel clerks who screen applicants to obtain data regarding minimum qualifications and fitness for employment generally are not exempt State inspectors or investigators are nonexempt

21 Job Duties Test - Professionals Learned Professions Creative Professions

22 Learned Professional Duties The employee s primary duty is the performance of work requiring Advanced knowledge In a field of science or learning Customarily acquired by a prolonged course of specialized intellectual instruction

23 Advanced Knowledge Work is predominantly intellectual in character Work requiring the consistent exercise of discretion and judgment The advanced knowledge is generally used to analyze, interpret, and make deductions

24 Examples of Learned Professionals Doctors Registered nurses If paid by the hour, will not meet salary basis test Dental hygienists Pharmacists Certified physician assistants Engineers Teachers Lawyers Accountants Chefs Actuaries Athletic trainers Licensed funeral directors or embalmers

25 Nonexempt Professions Licensed practical nurses Accounting clerks and bookkeepers Cooks Paralegals and legal assistants Engineering technicians

26 Creative Professional Duties The employee s primary duty is the performance of work requiring Invention, imagination, originality or talent In a recognized field of artistic or creative endeavor

27 Invention, Imagination, Originality or Talent Exempt status is determined on a case-by-case basis, depending on the extent of the invention, imagination, originality or talent exercised

28 Includes Music Musicians, composers, conductors & soloists Writing Recognized Field of Artistic or Creative Endeavor Essayists, novelists, short story writers Screen play writers who choose subject Responsible writing positions in ad agencies Acting Graphic arts Painting, cartoonists, photographers

29 Computer Employees Meets salary level and salary basis test or is paid not less than $27.63 per hour Primary duty must consist of: Application of systems analysis techniques and procedures, including consulting with users to determine hardware, software or system function specifications or

30 Computer Employees Design, documentation, testing, creation or modification of computer programs related to machine operating systems or 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 or A combination of the above duties, requiring the same level of skills

31 REMEMBER It is not the job title or job description that is important. Actual job duties performed must be examined to determine if an employee is exempt.

32 Law Enforcement & Firefighters Exempt from OT under federal law if the public agency has fewer than 5 employees engaged in fire protection or law enforcement activities Partial OT exemption for law enforcement & firefighters known as the 7(k) exemption under State and federal law

33 Options for 12/1/16 Change Raise salary to retain exemption Consider other applicable exemptions Re-classify all below $47,476 as non-exempt Keep records Limit/manage hours worked to avoid 40+ hours Consider part-time employees to cover workload Will simply increase number of non-exempt employees Manage the same way as current non-exempt employees

34 Compensatory Time Public agencies may offer comp time if: Provided at 1 ½ hours off with pay for each hour of OT worked Done pursuant to a collective bargaining agreement or other prior agreement Accrued time does not exceed maximums

35 Comp Time Maximums Police, firefighters, emergency response personnel, and employees engaged in seasonal activities may accrue a maximum of 480 hours of comp time All other employees may accrue a maximum of 240 hours

36 Use of Comp Time Employees are entitled to use comp time within a reasonable period after making a request, so long as it does not unduly disrupt the operation of the agency Employees can not be penalized for requesting or using comp time An employer may require the use of comp time by policy. Christensen v. Harris County, 529 U.S. 576 (2000)

37 Payment of Comp Time An employee must be paid accrued comp time at termination at his current rate of pay or the average rate of pay over the past 3 years, whichever is higher.

38 Hours Worked Generally, hours worked is the time an employee is: Required to be on duty Required to be on the employer s premises or other prescribed place of work Allowed, suffered or permitted to work

39 Hours Worked Work that is not requested or approved but is permitted or allowed is work time and is compensable. For example: An employee may voluntarily continue work at the end of the shift to finish a task or correct errors An employee may eat lunch at his desk and answer the phone /texts outside normal work hours

40 Hours Worked Management MUST exercise its control and see that work is not performed if it does not want it to be performed. Management cannot sit back and accept the benefits of work without compensating for it. The mere promulgation of a rule against such work is not enough.

41 On call time An employee who is required to remain on call on the employer s premises is working An employee who is required to remain on call at home, carry a phone, or leave a number where he can be reached is not (in most cases) working Exception: where the constraints on the employee s freedom are such that he can not effectively use his time for his own purposes

42 Breaks & Meal Periods Breaks of 20 minutes or less are work time. Meal periods, typically 30 minutes or more, need not count as work time. Employee must be completely relieved of duty. If the employee is required to perform any duties, active or inactive, the time is compensable.

43 Such activities need not be counted as work time if all four criteria are met: It is outside normal work hours It is voluntary Lectures, Meetings & It is not job related Training Programs No productive work is performed

44 Travel Time Home to Work Travel An employee who travels from home before the regular workday and returns home at the end of the workday is engaged in ordinary home to work travel, which is not work time It does not matter if the employee works at a fixed location or at different job sites This does not include travel back to work after returning home at the end of the day due to an emergency outside regular work hours

45 Travel Time Home to Work on a Special One Day Assignment in Another City An employee who regularly works at a fixed location in one city and is given a special one day assignment in another city and returns home the same day The travel time is work time, although the employer does not have to count the time that would have normally been spent commuting

46 Travel Time Travel That is All in the Day s Work Time spent by an employee in travel as part of his principal activity, such as travel from job site to job site during the workday, is work time

47 Travel Time Travel Away from Home Community This is travel that keeps an employee away from home overnight If the travel cuts across the hours the employee regularly works, it is counted as hours worked. This is true even if the travel is on a nonwork day, such as Saturday or Sunday Time spent as a passenger on an airplane, train, boat, bus or car outside regular working hours does not have to be counted as hours worked

48 Travel Time Anytime an employee is working while traveling, it is counted as hours worked Driving is working, except in normal home to work travel

49 Recordkeeping Good records are essential for proper compliance Payroll records and time cards and wage computation records must be kept for 3 years No particular form is required A poster is required to be posted by employer

50 Timekeeping An employer may choose any timekeeping method as long as it is complete and accurate. It is acceptable, particularly where time clocks are used, to round employees starting time and stopping time to the nearest 5 minutes or to the nearest one-tenth or quarter of an hour. This practice is not acceptable if, over a period of time, it results in a failure to properly compensate.

51 Common Errors Hours Worked Failing to pay for all hours an employee is suffered or permitted to work Failure to pay for pre- or post- shift work activities Deducting short rest breaks from work hours Employee works during meal break and is not paid Employee takes work home Not paying for compensable travel time Not paying for employee meetings

52 Common Errors Recordkeeping Limiting employees to reporting only 40 hours per week and ignoring time actually worked Inaccurate recordkeeping because payroll entry performed early Auto deducting lunches/breaks

53 Common Errors Misclassification Improperly applying an exemption Assuming that DFA or class specification as exempt is correct General FAILURE TO MONITOR/MANAGE EMPLOYEE TIME

54 Effect of Improper Deductions If employer has a pattern or practice of improper deductions, the exemption will be lost: During the time period of improper deductions For similarly classified employees Working for the same manager(s) Isolated or inadvertent improper deductions will not result in loss of the exemption if the employee is reimbursed

55 Safe Harbor The exemption will not be lost if the employer: Has a clearly communicated policy prohibiting improper deductions Has a complaint mechanism Reimburses employees Makes a good faith commitment to future compliance Unless the employer has a willful violation by continuing to make improper deductions after employee complaints

56 Enforcement-Federal An employer will be liable for back wages and liquidated damages equal to the amount of back wages, plus court costs and attorney fees Employers who willfully or repeatedly violate MW and OT requirements are subject to a civil money penalty up to $1,100 for each violation

57 Enforcement-Federal Willful violations may be criminally prosecuted and the violator fined up to $10,000. A 2nd conviction may result in imprisonment. A 2-year statute of limitations applies to recovery of back wages, except in cases of willful violations, there is a 3-year statute of limitations.

58 Enforcement-Federal A state employee can not bring a lawsuit for violations of federal FLSA against the State in either state or federal court. See Alden v. Maine, 527 U.S. 706 (1999). The Secretary of Labor can bring a suit against a state and the U.S. Department of Labor prioritizes complaints of state employees.

59 Enforcement-State An employer will be liable for back wages, court costs and attorney fees and may be liable for liquidated damages equal to the amount of back wages Employers who willfully violates MW and OT requirements are subject to a civil money penalty up to $1000 for each violation

60 Enforcement-State There is a 3-year statute of limitations for suits brought by an individual A suit against the State or a political subdivision of the state is specifically authorized by statute

61 AGLeslieRutledge AGRutledge AGLeslieRutledge ArkansasAG AGRutledge Attorney General Leslie Rutledge