The Fair Labor Standards Act FLSA hrconsulting@jwterrill.com Michelle Perris Human Resources Consultant Carol Emge Human Resources Consultant 1
Overtime updates will extend protections to 4.2 million workers across the country 2
Fair Labor Standards Act (FLSA) FLSA Basics New FLSA Ruling Employer Responsibilities General Cautions & Pitfalls 3
The Basics Fair Labor Standards Act Exempt versus Non-Exempt Salary Level Test Duties Test Highly Compensated Employees Recordkeeping 4
The Basics Exemptions Executive Employees Administrative Employees Learned Professional Creative Professional Outside Sales Employees https://www.dol.gov/whd/overtime/fs17a_overview.pdf 5
New FLSA Ruling What has changed Effective December 1, 2016 Salary Basis - must be $47,476 annually or $913 per week Duties Testing No change Highly Compensated increased to $134,004 which still includes the $913/week threshold Automatic Updating Nondiscretionary Bonus and Incentive Payments 6
Nondiscretionary Bonus A non-discretionary bonus is tied to a measurable objective such as productivity, revenue, achievement of goals, tenure or other measurable factor. It does not include spot bonuses that are made arbitrarily at the discretion of the employer Non-discretionary bonuses are included when determining the overtime rate of pay. 7
Nondiscretionary Bonus - Example Annual Gross Salary = $48,000 Base salary = $43,200 Annual Non-Discretionary Payment = $4800 $4,800 / 4 quarters = $1,200 Employer may apply up to $1,200 per quarter toward meeting the minimum salary requirement* *10% is the maximum that can be applied even if employee earns more in incentive payments. 8
Compensable Hours What constitutes compensable time under the FLSA? Definition of "Employ "Suffered or Permitted" to work 9
Compensable Hours Considerations for Non Exempt Employees Waiting Time 10
Compensable Hours Considerations for Non Exempt Employees On Call Time 11
Compensable Hours Considerations for Non Exempt Employees Rest & Meal Periods 12
Compensable Hours Considerations for Non Exempt Employees Sleeping Time 13
Compensable Hours Considerations for Non Exempt Employees Lectures, Meetings and Training Programs 14
Compensable Hours Considerations for Non Exempt Employees Travel Time 15
Employer Responsibility Job Descriptions Financial Reorganizational Benefits Communications 16
Job Descriptions Department of Labor (DOL) Number One Area of Employment Litigation Increased FLSA Audits Guilty Until Proven Innocent Do not base decisions on job description/title alone Revisit Job Descriptions Job Duties do they match actual job function Desk Audit employee and supervisor involvement FLSA Duties Test 17
Compensation Analysis Review Salary Grades Consider two sets of grades Exempt and Non Exempt Start Exempt Grades at New Minimum Benchmarking to the Market Ensure Paying Appropriately External and Internal Compensation Audit 18
Financial Analysis: Example 1 Increase salary to minimum $47,476 and keep exemption status. This assumes that employees meet the job duties test. Employee is currently at $45,500 by giving them a.046 adjustment ($2093) puts them at $47,593 Caution of salary compression 19
Financial Analysis: Example 2 Reclassify as non-exempt and absorb overtime costs. Exempt employee earns $38,000 per year and averages 45 hours per week ($38,000/52 weeks) / 40 hours per week = $18.26 per hour ($18.26 x 40 hours) + [($18.26 x 1.5) x 5 hours] = $867.35 weekly wage as non exempt x 52 weeks = $45,102.20 annual salary 20
Financial Analysis: Example 3 Reclassify as non-exempt and reduce hourly rate of pay to allow the overtime costs to bring the employee up to current salary level. This assumes that employees meet the job duties test Exempt employee earns $43,000 per year and averages 50 hours per week ($43,000/52 weeks) / 50 hours per week =$16.53 per hour ($16.53 x 40 hours) +[(16.53 x 1.5) x 10 hours] = $909.15 weekly wage as non exempt x 52 weeks = $47,275.80 annual salary 21
Reorganization Reduce the need for overtime Reclassify as Non-Exempt Hire part-time workers Eliminate unnecessary tasks Allocate tasks more broadly across department Outsource 22
Benefits Non Exempt vs Exempt Vacation Time Sick Days Insurance 23
Communication Pay Transparency Morale Retention Productivity Work Relationships Job Satisfaction 24
Recordkeeping Employer is required to maintain time records Employee s full name Social Security Number Address, including zip code Birthday (if younger than 19) Sex Occupation Define workweek Hours worked each day Total hours worked each workweek Basis on which employee s wages are paid Regular hourly pay rate Total daily or weekly straighttime earning, and total overtime earnings for the workweek All additions to or deductions from employee s wages Total wages paid each pay period Date of payment and the pay period covered by the payment 25
Meal Breaks Area of Concern Bona Fide Meal Period Typically 30 minutes or more Relieved from duty DOL vs Court Definition Relieved from Work (checking email, phone) Predominant Benefits Test 26
Training Training Supervisors Compensatory Time Relieved of Duty Discipline but must pay Overtime Follow Policy 27
General Cautions and Common Pitfalls Review Grade and Range Minimums for Exempt Employees Compression Check Bonus Plan Overtime Policy Up to Date 28
Assistance Job Descriptions Desk Audit Compensation Analysis Benchmarking Policy Development 29
Thank you! Michelle Perris & Carol Emge hrconsulting@jwterrill.com (314) 594-2700 The recommendations and opinions provided herein are based on general Human Resources management fundamentals, practices and principles and are not legal opinions or guaranteed outcomes. We strongly recommend as part of a team approach to management, that clients consult with legal counsel of their choice to address legal concerns related to human resource issues. 30