What: The Department of Labor’s New Proposed Overtime Standards – What Should I be doing?
Where: Via Webinar or In-Person at 9435 Waterstone Blvd, Cincinnati, Ohio 45249
Who: Julie Byrne (Frost Brown Todd) and Amy Ramsey (IronRoad)
IronRoad will now offer monthly sessions open to all! More to come. Our goals are to educate on topics you care about, build meaningful relationships, and provide connection opportunities.
Objectives:
Participants will be provided knowledge of the DOL proposal and changes to the Fair Labor Standards Act
Participants will be able to identify how this will effect their business
Participants will gain practical strategies for how to implement the changes in their business and which strategies will work best for their business
Participants will be provided with a plan of support and partnership from IronRoad as their business undergoes these changes
Who Should Attend:
If you are a business owner or decision maker with employee wages
If you currently have employees that are salary (“exempt”) that are making less than $47,476 annually
If you do not have policies regarding overtime pay for hourly (“non-exempt”) employees
1. Strategies to Respond to the DOL’s
Revised Salary Exempt Test
Julie E. Byrne, Esq.
Frost Brown Todd LLC
9277 Centre Pointe Drive, Suite 300
West Chester OH 45069
513.870.8214 – direct
jebyrne@fbtlaw.com
www.frostbrowntodd.com
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Amy Ramsey
IronRoad
9435 Waterstone Blvd
513.605.3522
aramsey@ironroad.us
www.ironroad.us
3. Historical Perspective—Why was
FLSA passed?
Passed in 1938
Controversial
Southern States were concerned over amount of
minimum wage
Applied to approximately 1/5 of the workforce
Designed to address unemployment by
spreading work around.
Minimum wage: 25 cents
Hour Threshold: 44
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4. Statutory Exemption Language
29 USC 213 (a)(1)
The provisions of sections 206 … and 207 of
this title shall not apply with respect to— (1)
any employee employed in a bona fide
executive, administrative, or professional
capacity (including any employee employed
in the capacity of academic administrative
personnel or teacher in elementary or
secondary schools), or in the capacity of
outside salesman (as such terms are
defined and delimited from time to time
by regulations of the Secretary…
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5. White-Collar Exemptions
(Quick Review)
Most common
Executive.
Administrative.
Professional.
Others
Outside Sales.
Commissions okay; no salary requirement.
Skilled Computer.
Can be salary or hourly.
Highly Compensated Employee
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6. Three tests
To be considered "exempt," employees
must generally satisfy three tests that focus
on how the employee is paid and the type of
job duties the employee performs:
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salary level salary basis duties
7. Proposed Rule Changes
• March 13, 2014 Executive Order
• Stated that because the white-collar exemptions are
“outdated, millions of Americans lack the protections” of
minimum wage and overtime.
• Directed DOL to propose regulation revisions.
• Instructed DOL to consider revisions consistent with the
intent of the FLSA, the changing workplace, and to simplify
the regulations.
• Translation: make more people subject to overtime
requirements.
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8. Rule Changes
Department of Labor Rule Changes – June 30, 2015
Increase the Salary Basis Test for White Collar Exemptions
Increases salary basis for Highly Compensated Employee
exemption.
Public Comment period ended September 30, 2015.
Over 270,000 comments in response
Final Rule published May 18, 2016.
Effective Date: December 1, 2016.
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9. Final Rule Changes
Salary Basis Minimum
Current Minimum
$23,660 or $455/week.
Proposed New Minimum
40th percentile of all full-time salaried workers earnings
of full-time salaried workers in the lowest-wage Census
Region, currently the South
Evolving target. Automatic updates to these
thresholds will occur every three years, beginning on
January 1, 2020.
Lawful? What about notice and comment?
2016 = $50,440. $47,476
e.g. $970 / week. $913 / week.
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10. Proposed Rule Changes
Highly Compensated Employee
Current Minimum
$100,000 / year
Proposed New Minimum
90th percentile of all full-time salaried
workers
Evolving target
2016 = $134,004 / year
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11. Something new…
Additionally, the Final Rule amends the salary basis
test to allow employers to use nondiscretionary
bonuses and incentive payments (including
commissions) to satisfy up to 10 percent of the new
standard salary level.
Such payments must be made on a quarterly or more
frequent basis
In the proposal, the DOL said it was considering permitting
nondiscretionary bonuses, incentives, and commissions to
count toward 10 percent of the salary level, but only if
employers paid them on a monthly or more frequent basis.
The Final Rule also allows employers to make a "catch-up"
payment at the end of each quarter.
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13. Tension
“Today, the annualized equivalent of the
standard salary level is below the 2015
poverty threshold for a family of four, making
it inconsistent with Congress' intent to
exempt only "bona fide" EAP workers…”
But what about regional and industry
concerns?
Entire facilities without an EAP worker…
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14. Anticipated Effects of the Rule Changes
4.6 Million workers will change from exempt to non-
exempt.
Approximately $255 million per year for employers to
familiarize themselves with new rules
Transfer approximately $1.3 billion dollars of income
from employers to employees via higher earnings.
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15. Practical Impact
Employee earns $41,600 / year.
No longer meets salary basis test – now non-
exempt.
Hourly rate = $20 / hour
Overtime rate = $30 / hour
Works 50 hours per week.
10 hours overtime / week = $300 OT / week
50 weeks = $15,000 OT
Two years = $30,000 OT
Backpay + Liquidated damages = $60,000
Plus attorney’s fees
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16. Practical Impact
Reassignment of duties
FLSA originally designed to deter overtime and
spread out work
Most employers have policies forbidding overtime
unless approved
Increase in some employees salaries to
avoid overtime expenses
Likely with an increase in responsibilities due to
reassignment of lower paid employees duties
Some will have no choice: Increase in
overtime costs
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18. How to Deal with Changes
Salaried employees earning less than $ 47,476 /
year
Conduct audit of job to determine if duties otherwise meet
exemption.
Consider moving all salaries up to new level
Be consistent with job titles
Be wary of changing job titles to meet salary basis test
Be consistent
Base changes on objective evidence / facts
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19. How to Deal with Changes
Revise job descriptions to match job
Not the other way around
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20. How to Deal with Changes
Move affected positions to non-salaried
positions
Be sensitive to employee perceptions about non-
salaried role.
Explain basis for change
Opportunity for overtime
Monitor overtime
You can discipline for non-approved overtime
You must pay for all overtime worked
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21. Consider salaried, non-exempt positions.
Must calculate regular rate and pay overtime.
Divide total earnings by hours worked for the week.
Must keep track of hours worked.
Ensure descriptions of “salaried” positions
specify that the salary is for all hours worked.
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How to Deal with Changes
22. How to Deal with Changes
Do NOT consider making changes in a legal
vacuum
FLSA is not the only factor to consider
Ex: NLRA supervisor (generally “assign” and
“responsibly to direct” employees and to exercise
“independent judgment)
Charge nurses?
Shift supervisors?
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23. IronRoad’s Plan
IronRoad will provide report of potentially
effected employees
Cross-section of exempt employees
Review List:
Trends of positions?
Review Job Descriptions:
Does the employee’s job description
match their actual job responsibilities and
duties?
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24. Audit Job Descriptions
DOL Goal=
More employees are “Non-Exempt” and
eligible for Overtime
In Line with Foundation of FLSA
Philosophy
What are the employee’s tasks?
Discretion and Independence?
Or following standards of operations?
Employees need to sign off on their job
description
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25. If employee changed to Non-
Exempt
Now employee is “Non-Exempt”
Determine hourly rate
Non-Exempt Salary
Half-Time pay for Overtime Calculation
Change of Status Form Provided to IronRoad
MUST have job descriptions to validate change of
classification from Exempt to Non-Exempt
Meeting with Employee
Discuss New Wage Rate
Discuss Tracking Hours
Discuss Overtime Policies
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26. If Employee Remains Exempt
Employee is going to remain “Exempt”
Job responsibilities qualify employee to remain
exempt
Adjust Salary accordingly
Inform employee of change
Change of Status form provided to IronRoad
Salary rate change needs to be noted
Job description not required to make this change.
The exceptions:
Outside Sales, Teachers, Lawyers, etc.
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27. Overtime Policy Review
All Employees who are Non-Exempt MUST be paid
overtime for all hours over 40 hours per week
including employees who are Non-Exempt Salary
Regardless of if the OT is approved
Overtime Policy Needs to Define:
Does overtime needs to be approved?
Consequences for violating policy
Written Warning?
Repeated Offenses– Termination?
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28. Julie E. Byrne, Esq.
Frost Brown Todd LLC
9277 Centre Pointe Drive, Suite 300
West Chester OH 45069
513.870.8214 – direct
jebyrne@fbtlaw.com
www.frostbrowntodd.com
Amy Ramsey
IronRoad
9435 Waterstone Blvd
513.605.3522
aramsey@ironroad.us
www.ironroad.us