The document discusses the Department of Labor's new overtime exemption rules effective December 1, 2016, which raise the minimum salary threshold for salaried exempt status from $455 to $913 per week. It outlines the impact on approximately 4.2 million workers, who may become eligible for overtime unless salary adjustments are made, and mentions a lawsuit from 21 states challenging these changes. Additionally, it highlights Wisconsin's specific wage and hour rules that may differ from federal regulations.

1. Milwaukee | Madison
411 East Wisconsin Avenue | Suite 1000 | Milwaukee, WI 53202 | www.vonbriesen.com
Presented to
HNI Risk Services
16805 W. Cleveland Ave.
New Berlin, WI
September 30, 2016 - 8:00 a.m. – 9:00 a.m.
By Doris E. Brosnan
An Employer Guide: DOL’s
New Overtime Exemption
Rules

2. Overview of Upcoming Changes
• In 2014, Pres. Obama asked Dept. of Labor
(“DOL”) to revise the regulations, which
had not been revised since 2004.
• On May 18, 2016, the DOL released its final
rule.
• The changes relate to the minimum salary
threshold for the salaried exempt status.

3. Review of White-Collar Exemptions
• Salary level test.
• Salary basis test.
• Job duties test.

4. “Salaried exempt” status
• Exempt from minimum wage and overtime
pay requirements.
• What is salaried basis?
– Paid the same amount every week, regardless
of hours worked (with some exceptions).
– Have to meet standards related to job duties.

5. Duties Test - Concepts
• Executive: Managing at least 2 other employees (hiring,
firing, disciplining).
• Administrative: Nonmanual tasks using independent
judgment and discretion.
• Learned Pro: Work which is intellectual in character
requiring the consistent exercise of discretion and
judgment.
• Creative Pro: Work requiring invention, imagination,
originality or talent in a recognized field of artistic or
creative endeavor.

6. Duties Test – Concepts (con’t)
• Computer Professional: computer systems analysts,
computer programmers, software engineers or other
similarly skilled worker in the computer field performing
certain duties.
• Outside Sales: Making sales or obtaining orders or
contracts for services or use facilities AND customarily
and regularly engaged away from the employer’s place or
places of business.
• Highly Compensated: Office or non-manual work and paid
total annual compensation of $100,000 (changing!)

7. New FLSA Rules (eff. 12/1)
• New minimum salary to make the “salaried
employee” exemption increased from $455/week
($23,660/year) to $913/week ($47,476/year).
• Sets the total annual compensation requirement
for highly compensated employees to $134,004.
• Establishes a mechanism for automatically
updating the salary and compensation levels
every 3 years (beginning in 2020)

8. Bonus Can Be Counted (sort of)
• Employers may use nondiscretionary bonuses and
incentive payments (including commissions) to satisfy up
to 10 percent of the standard salary level.
• Incentive bonuses tied to productivity and profitability.
(Retention bonuses, commissions, formula-based)
• MAJOR REQUIREMENT: These bonuses must be paid on a
quarterly or more frequent basis.
• Nondiscretionary is NOT spontaneously decided by
employer.

9. Consequences
• 4.2 million workers are going to now be
overtime eligible (unless they get a pay
raise).
• May especially hurt rural businesses, small
not-for-profit businesses, and local
governments.

10. Federal Court Challenge
• On Sept. 19, 2016, a group of 21 states filed a
lawsuit in federal court in the Eastern District of
Texas challenging the rule.
• The group is led by Texas and Nevada, and it
includes Wisconsin.
• Argument: the new rule will force businesses,
including state and local governments to
“unfairly” increase their labor costs.

11. Federal Court Challenge (con’t)
• State govs. argue that the 10th Amendment
is violated and it will wreck state budgets.
• Challenge to mechanism for automatic
increases every 3 years: violates
Administrative Procedure Act because it is
arbitrary and capricious and does not
follow rulemaking requirement.

12. Conventional Wisdom
• This lawsuit is….very far from certain to
succeed.
• Employers need to assume the rule will go
into affect on 12/1.
• Do not wait for a federal court to stop the
rules.

13. How to Prepare?
• Audit your exempt workforce. Identify
anyone making a salary less than the
thresholds.
• Raise salaries or be prepare to pay
overtime for hours worked over 40 in a
workweek.
• Make everyone keep track of time.

14. Reclassifying Employees
• Work with outside counsel.
• There are pitfalls.

15. Wisconsin Rules
• Don’t forget about Wisconsin’s wage and
hour rules!
• Not enforced against non-profits.
• If there is a difference in favor of
employee, you must follow Wisconsin rule.

16. Duties Test – Wisconsin Difference
• Wisconsin rules impose percentage limits on the amount
of nonexempt work an employee may perform.
• Limit = 20% for most exempt jobs, and 40% for retail and
service establishments.
• Wisconsin also says exemption only applies to overtime,
not minimum wage.
• NOTE: Wisconsin overtime law not enforced against non-
profits.

17. Other Wage and Hour Issues
“Off the clock” work will continue to be the
subject of collective and class actions.
– “Preliminary” and postliminary” time
– “Donning and Doffing”
– Unpaid meal periods that are constantly
interrupted.
– Work from home on digital devices.

18. QUESTIONS???