Earlier this year, the Department of Labor released its final rule amending the Fair Labor Standards Act’s (FLSA) white collar exemption, resulting in widespread buzz in the business community about skyrocketing overtime costs and financial impact on employers. While the changes to the regulations more than doubled the minimum salary threshold level for exempt employees (from $23,660 to $47,476), this program will help employers evaluate their options and strategies for transitioning their workforce to ensure compliance with the new rules. The program will discuss the Final Rule and what’s changed, as well as the impact on employers and steps to take to ensure compliance before December 2016.

1. Thrive. Grow. Achieve.
New FLSA Overtime Changes:
What Your Business Needs to
Know to React Accordingly…
And Not to Panic
Stacy Johnson, SPHR, SHRM-SCP,
Manager, Managed HR Services
October 5, 2016

2. RECENT NEWS
HOUSE VOTES TO DELAY OVERTIME RULE: THE HOUSE VOTED
246-177 LAST WEDNESDAY (SEPTEMBER 28, 2016) TO DELAY
IMPLEMENTATION OF THE LABOR DEPARTMENT'S
CONTROVERSIAL OVERTIME RULE. THE RULE DOUBLES (TO
$47,476) THE SALARY THRESHOLD UNDER WHICH VIRTUALLY ALL
WORKERS ARE GUARANTEED TIME-AND-A-HALF PAY WHENEVER
THEY WORK MORE THAN 40 HOURS IN A GIVEN WEEK. IT IS
SUPPOSED TO TAKE EFFECT IN DECEMBER, BUT THE BILL
WOULD PUSH IMPLEMENTATION TO JUNE 2017; THE WHITE
HOUSE HAS PROMISED A VETO.
REPUBLICANS VOTED UNANIMOUSLY FOR THE BILL, ALONG WITH
FIVE DEMOCRATS: REPS. BRAD ASHFORD (NEB.), HENRY
CUELLAR OF TEXAS, DAN LIPINSKI OF ILLINOIS, COLLIN
PETERSON OF MINNESOTA, AND KYRSTEN SINEMA OF ARIZONA.
PRIOR TO THE VOTE, REP. TIM WALBERG (R-MICH.), WHO
INTRODUCED THE LEGISLATION, SAID THE OT RULE "BURDENS
HARD-WORKING SMALL-BUSINESS OWNERS" AND
"JEOPARDIZES VITAL SERVICES FOR VULNERABLE AMERICANS."
BUT REP. BOBBY SCOTT (D-VA.) DISAGREED. HE SAID THE RULE
WILL CREATE MORE THAN 100,000 JOBS.
House
Votes to
Delay OT
Rule

3. LEARNING OBJECTIVES
•What’s Changed? DOL’s Final Rule revising the current
“White Collar” exemption regulations
•Clarification on the complex provisions of the FLSA
•Common wage and hour law traps

4. FAIR LABOR STANDARDS ACT
•THE FLSA REGULATES:
–Minimum Wage (on the Federal level)
–Overtime Pay
–Child Labor
–Equal Pay
•THE FLSA DOES NOT REQUIRE OR REGULATE:
–Breaks
–Premium Pay or Shift Differentials
–Raises
–Vacation or Sick Leave
–Holiday Pay
–Severance Pay
–Pension Benefits

5. OVERTIME PROVISION: EXEMPTIONS
•“WHITE COLLAR” EXEMPTIONS (EXECUTIVE, ADMINISTRATIVE AND
PROFESSIONAL)
•THESE EXEMPTION CATEGORIES EACH HAVE A SALARY TEST AND A
DUTIES TEST
•EMPLOYEES WHO MEET THE TESTS FOR THEIR CATEGORIES DO NOT
HAVE TO BE PAID OVERTIME PAY, REGARDLESS OF HOW MUCH
OVERTIME THEY WORK
•FLSA (FEDERAL) OVERTIME = IN EXCESS OF 40 IN A WORKWEEK

6. THE THREE TESTS
1. SALARY BASIS TEST: THE EMPLOYEE MUST BE PAID A
PREDETERMINED AND FIXED SALARY, NOT AN HOURLY WAGE
THAT IS SUBJECT TO REDUCTIONS BECAUSE OF VARIATIONS IN
THE QUALITY OR QUANTITY OF WORK PERFORMED
2. SALARY LEVEL TEST: THE AMOUNT OF SALARY PAID MUST
MEET MINIMUM SPECIFIED AMOUNTS
3. DUTIES TEST: THE EMPLOYEE’S JOB DUTIES MUST PRIMARILY
INVOLVE MANAGERIAL, ADMINISTRATIVE OR PROFESSIONAL
SKILLS DEFINED BY THE FLSA

7. $47,476 IS THE NEW FLOOR
•MINIMUM THRESHOLD SALARY INCREASES FROM $23,660
($455/WEEK) TO $47,476 ($913/WEEK) EFFECTIVE DECEMBER 1, 2016
•ANY EXEMPT EMPLOYEE MAKING LESS THAN $913 PER WEEK MUST
BE
1. Given a raise to make their total compensation equal
to new salary threshold, OR
2. Reclassified as a non-exempt employee who would
now be entitled to overtime pay

8. INCENTIVE PAY AND THE SALARY BASIS
NON-DISCRETIONARY BONUSES AND INCENTIVE PAY, INCLUDING
COMMISSION AND BONUSES TIED TO PRODUCTIVITY AND
PROFITABILITY, CAN SATISFY UP TO 10% OF THE THRESHOLD SALARY
LEVEL
• Must be made on quarterly or more frequent basis
• Non-discretionary bonuses and incentive payments are forms of
compensation promised to employees (i.e., promised ahead of time and
based on a fixed formula)
• By contrast, discretionary bonuses are those for which the decision to
award the bonus and the payment amount is at the employer’s sole
discretion and without any preannounced standards (i.e., holiday bonus)

9. NEXT STEPS
REVIEW JOB DESCRIPTIONS – EVALUATE THE RESPONSIBILITIES FOR
EXECUTIVE, ADMINISTRATIVE AND PROFESSIONAL DUTIES
CONSIDERING INCREASING SALARY
PAY OVERTIME WHEN INCURRED
DECREASE PAY TO ACCOUNT FOR OVERTIME INCURRED
RECLASSIFY AS NON-EXEMPT AND MANAGE HOURS WORKED TO
AVOID POTENTIAL OVERTIME
• Train on time recording policies
TRANSFER JOB DUTIES/RESTRUCTURE WORK

10. REVIEWING RESPONSIBILITIES:
DUTIES TEST
•DUTIES TEST IS PERHAPS THE MOST COMPLEX PIECE OF THE
REGULATION AND CHALLENGING TO EMPLOYERS
•NO CHANGES TO DUTIES TEST AS PART OF THE NEW FINAL RULE
•REMAINS A QUALITATIVE ASSESSMENT, AND ITS APPLICATION WILL
LIKELY BE UNDER CLOSE SCRUTINY BY THE DOL
–Increased Awareness
–Litigation costs for class action lawsuits
Executive
Administrative
Learned
Professional
Creative
Professional
Computer
Professional
Outside Sales

11. EXECUTIVE EXEMPTION
TO QUALIFY FOR THE EXECUTIVE EMPLOYEE EXEMPTION, ALL OF THE
FOLLOWING TESTS MUST BE MET:
• The employee must be compensated on a salary basis (as defined in the
regulations) at a rate not less than $913 per week;
• The employee’s primary duty must be managing the enterprise, or managing a
customarily recognized department or subdivision of the enterprise;
• The employee must customarily and regularly direct the work of at least two or more
other full-time employees or their equivalent; and
• The employee must have the authority to hire or fire other employees, or the
employee’s suggestions and recommendations as to the hiring, firing,
advancement, promotion or any other change of status of other employees must be
given particular weight.

12. PROFESSIONAL EXEMPTION
TO QUALIFY FOR THE LEARNED PROFESSIONAL EMPLOYEE
EXEMPTION, ALL OF THE FOLLOWING TESTS MUST BE MET:
• The employee must be compensated on a salary or fee basis (as defined in the
regulations) at a rate not less than $913 per week;
• The employee’s primary duty must be the performance of work requiring advanced
knowledge, defined as work which is predominantly intellectual in character and
which includes work requiring the constant exercise of discretion and judgment;
• The advanced knowledge must be in a field of science or learning; and
• The advanced knowledge must be customarily acquired by a prolonged course of
specialized intellectual instruction.

13. ADMINISTRATIVE EXEMPTION
TO QUALIFY FOR THE ADMINISTRATIVE EMPLOYEE EXEMPTION, ALL
OF THE FOLLOWING TESTS MUST BE MET:
• The employee must be compensated on a salary or fee basis (as defined in the
regulations) at a rate not less than $913 per week;
• The employee’s primary duty must be the performance of office or non-manual work
directly related to the management or general business operations of the employer
or the employer’s customers; and
• The employee’s primary duty includes the exercise of discretion and independent
judgment with respect to matters of significance.

14. DOL’S DEFINITIONS FOR
ADMINISTRATIVE EXEMPTION
PRIMARY DUTY
• The principal, main, major or most important duty that the employee performs
DIRECTLY RELATED TO MANAGEMENT OR GENERAL BUSINESS OPERATIONS
• Work directly related to assisting with the running or servicing of the business, as distinguished, for example
from working on a manufacturing production line or selling a product in a retail or service establishment
DISCRETION AND INDEPENDENT JUDGMENT
• Involves the comparison and the evaluation of possible courses of conduct and acting or making a decision
after the various possibilities have been considered. Factors to consider include, but are not limited to:
whether the employee has authority to formulate, affect, interpret, or implement management policies or
operating practices; whether the employee carries out major assignments in conducting the operations of the
business; whether the employee performs work that affects business operations to a substantial degree;
whether the employee has authority to commit the employer in matters that have significant financial impact;
whether the employee has authority to waive or deviate from established policies and procedures without
prior approval, and other factors set forth in the regulation. The fact that an employee’s decisions are revised
or reversed after review does not mean that the employee is not exercising discretion and independent
judgment. The exercise of discretion and independent judgment must be more than the use of skill in
applying well-established techniques, procedures or specific standards described in manuals or other
sources.
MATTERS OF SIGNIFICANCE
• The level of importance or consequence of the work performed. An employee does not exercise discretion
and independent judgment with respect to matters of significance merely because the employer will
experience financial losses if the employee fails to perform the job properly.

15. WEIGHING THE OPTIONS
Source: Society
for Human
Resource
Management
(SHRM), HR
Magazine,
July/August 2016

16. COMMON WAGE AND HOUR LAW
MISTAKES
•ASSUMING YOUR ORGANIZATION IS TOO SMALL TO BE COVERED BY
THE FLSA
•ASSUMING SALARY OR TITLE MAKES AN EMPLOYEE EXEMPT
•ASSUMING SALARY WILL COVER OVERTIME
•ALLOWING EMPLOYEES TO WORK “OFF THE CLOCK”
•TRUSTING EMPLOYEES TO KEEP THEIR OWN TIME RECORDS
•GIVING “COMP TIME” IN LIEU OF OVERTIME
•FAILING TO PAY “CONTRACT EMPLOYEES” FOR OVERTIME
•MAKING IMPROPER DEDUCTIONS
•UNDERSTANDING COMPENSATORY TIME & HOURS WORKED
Some states have
their own wage
and hour laws that
may be more
beneficial towards
employees and
should be carefully
noted to ensure
compliance

17. FLSA Checklist: Exempt vs. nonexempt status
It’s up to employers to determine whether to classify an employee as exempt or
nonexempt under the Fair Labor Standards Act (FLSA). The key consideration:
Exempt workers aren’t eligible for overtime pay. Rather, they’re paid for the job they
do, not the hours they keep.
To comply with the FLSA, employers need to regularly review their employee classi-
fications. Generally, two requirements must be met to classify an employee as exempt: 1) they must
earn a salary and 2) hold a position with duties the U.S. Labor Department designates as appropriate
for exempt positions. Those positions generally fall into six categories: executive, administrative,
learned professional, computer professional, creative professional and outside sales.’
But it’s not that simple. That’s why HR Specialist prepared this checklist. Use it to determine
whether your employees are exempt from the FLSA.
(800) 433-0622 www.theHRSpecialist.com
AUDIT: TEST YOUR COMPLIANCE
To be considered exempt from overtime, an employee must generally be paid on a salary basis
and his job duties must meet the Labor Department’s standards for one of the six exemption
categories discussed below.
Use this self-audit to test whether you’re properly classifying workers as exempt.
s Executive Employee
Answer the following questions to determine whether you’ve misclassified a worker as an
exempt executive: Don’t
Yes No Know
1. Is the employee’s primary duty managing the enterprise or a department
or subdivision of the enterprise? u u u
2. Does the employee customarily direct the work of two or more other
employees or their equivalent? u u u
3. Does the employee have the authority to hire or fire, and do her
recommendations carry significant weight if unauthorized to make the
final decision? u u u
4. Is the employee paid the equivalent of at least $455 per week on a salary
basis? u u u
If you answered “No” to any of these questions, you may have misclassified the worker as an
exempt executive.
Note: If the employee is at least a 20 percent owner of the business and meets requirements #1
and #2 above, he need not meet the salary requirement in #4 or the authority requirement in #3.

18. www.theHRSpecialist.com (800) 433-0622
s Administrative Employee
Answer the following to determine whether a worker is misclassified as an exempt administrative
employee:
Don’t
Yes No Know
1. Is the employee’s primary duty performing office or non-manual work
directly related to the management or general business operations of the
employer or the employer’s customers? u u u
2. Does the employee exercise discretion and independent judgment with
respect to matters of significance? That is, does he evaluate and compare
possible courses of action and then make a decision or recommendation
after considering the various possibilities? u u u
3. Is the employee paid the equivalent of at least $455 per week on a salary
basis? u u u
If you answered “No” to any of these questions, the employee may be misclassified as exempt
administrative.
s Learned Professional Employee
Answer the following to determine whether a worker is misclassified as an exempt learned
professional:
Don’t
Yes No Know
1. Is the employee’s primary duty to perform work requiring knowledge of
an advanced type in a field of science or learning customarily acquired
by a prolonged course of specialized intellectual instruction? u u u
2. Is the advanced knowledge obtained by completing an academic course
of study resulting in a four-year college degree or leading to certification? u u u
3. Is the employee paid the equivalent of at least $455 per week on a salary
basis? u u u
If you answered “No” to any of these questions, the employee may be misclassified as an
exempt learned professional. Exception: Those who’ve completed the educational requirements
for a law or medical degree need not meet the minimum salary requirement. Also, teachers need
not be certified or meet the minimum salary requirement to qualify as learned professionals.
s Creative Professional Employee
Answer the following to determine whether a worker is misclassified as an exempt creative
professional:
Don’t
Yes No Know
1. Is the employee’s primary duty to perform work requiring invention,
originality or talent in a recognized field of artistic endeavor such as
music, writing, acting and the graphic arts? u u u
2. Does the work require more than intelligence, diligence and accuracy
(i.e., does it require “talent”)? u u u

19. (800) 433-0622 www.theHRSpecialist.com
s Creative Professional Employee (continued) Don’t
Yes No Know
3. Is the employee paid the equivalent of at least $455 per week on a salary
basis? u u u
If you answered “No” to these questions, you may have misclassified a worker as an exempt
creative professional.
s Computer Professional
Answer the following to determine whether a worker is misclassified as an exempt computer
professional:
Don’t
Yes No Know
1. Is the employee paid at least $455 per week on a salary or fee basis or,
if paid hourly, at a rate of not less than $27.63 per hour? u u u
2. Is the employee’s primary duty:
• Application of system analysis techniques and procedures, including
consulting with users, to determine hardware, software or system
functional specifications; or u u u
• 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 u u u
• Design, testing, documentation, creation or modification of computer
programs related to machine operating systems; or u u u
• A combination of the aforementioned duties requiring the same level
of skills? u u u
If you answered “No” to #1 or were unable to answer “Yes” to any parts under #2, you may
have misclassified the worker as an exempt computer professional.
s Outside Sales Employee
To determine whether a worker has been misclassified as an exempt outside sales employee,
answer the following questions:
Don’t
Yes No Know
1. Is the worker’s primary duty making outside sales? u u u
2. Does he regularly work away from the company’s place of business? u u u
3. Does the worker sell tangible or intangible items, such as goods,
insurance, stocks, bonds or real estate, or obtain orders or contracts for
services or the use of facilities? u u u
If you answered “No” to any of these questions, you may have misclassified the worker as an
exempt outside sales employee.

20. THANK YOU!
Stacy Johnson, SPHR, SHRM-SCP
Direct: 202-955-6733
E-mail: sjohnson@raffa.com
QUESTIONS?