The document discusses the upcoming changes to the Fair Labor Standards Act overtime exemptions that will take effect on December 1, 2016. It outlines the new salary level test of $47,476 per year, that certain bonuses and commissions can count toward the salary level, and that salary levels will increase every three years. It provides options for employers to comply, including raising salaries or reclassifying employees as nonexempt. It also promotes the use of compliance tools from ComplianceHR like the OT Cost Estimator and Navigator OT to help determine costs and exemption statuses.

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THE FINAL COUNTDOWN:
90 DAYS TO OVERTIME COMPLIANCE
August 2016

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Lori Brown
President
ComplianceHR

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 Quick Recap – What’s Changing in a Nutshell
 Steps to Compliance
 Using Navigator OT to Beat the December 1 buzzer
 Q&A
AGENDA

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EXEMPT VS. NON‐EXEMPT
The Fair Labor Standards Act requires employers to pay “nonexempt”
employees overtime pay for all hours worked over 40 in a workweek.
“Exempt” executive, administrative, professional, outside sales and
computer employees need not be paid overtime. To be exempt, employees
must generally satisfy three tests:
Currently, employers must pay
employees at least $455 per week
(the minimum salary requirement)
to qualify for the executive,
administrative, and professional
employee exemptions.
With very limited exceptions, the
employer must pay employees
their full salary in any week they
perform work, regardless of the
quality or quantity of the work.
To qualify for an executive,
administrative or professional
exemption an employee must
meet specific duties tests.
1 Salary‐level test 2 Salary‐basis test 3 Duties test

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CHALLENGES FOR EMPLOYERS
 Many employers struggle with properly
classifying their employees as exempt or non‐
exempt from overtime.
 The new rules will likely exacerbate this
struggle for many employers because they may
be forced to reconsider classification of
exempt employees whose salaries fall below
the proposed minimum threshold.
70%
The DOL estimates
that as many as
of employers are not
in full compliance
with the FLSA.

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Tammy McCutchen
VP Strategy, ComplianceHR
Littler Principal
Former Administrator, US‐DOL,
Wage & Hour Division
Author, 2004 Revisions to
White Collar Exemptions

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Effective Dec 1, 2016
 Minimum salary level increase
 Some bonuses and commissions
can count toward the minimum
salary level
 Salary levels will be increased
automatically every three years
WHAT’S CHANGING?

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$455 $23,660
$47,476$913
Current December 1, 2016
MINIMUM SALARY LEVEL

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Nondiscretionary bonuses,
commissions and other
incentive payments if paid at
least quarterly can satisfy up to
10 percent of the minimum
salary requirement
BONUS & COMMISSIONS

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 Each workweek, the employer must pay the
exempt employee a salary of at least 90% of the
minimum salary level – $821.70 ($42,728.40
annualized)
 At the end of the quarter, if that salary plus all
bonuses and commissions paid during the quarter
do not equal $11,869 ($47,476 ÷ 4), the employer
has to make up the shortfall in the first pay period
of the next quarter.
HOW WILL THIS WORK?

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 The salary levels will automatically increase every 3
years, beginning January 1, 2020
 DOL estimates that the 2020 minimum salary level for
exemption will be approximately $984 per week
($51,168 annualized)
 DOL will provide 150 days notice of the new salary
levels before the January 1st effective date in the
Federal Register and on the web at www.dol.gov/whd
AUTOMATIC SALARY INCREASES

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OPTION 1 Raise Exempt Employee’s Salaries
If you have exempt employees that are paid less than
the proposed minimum, you can raise their salaries to
the new requirement. If you elect this option, it is best
practice to review their job duties to ensure they
continue to qualify for these exemptions.
OPTION 2 Reclassify Employees as Nonexempt
If exempt employees don't meet the new salary
requirement, you can reclassify them as nonexempt
and pay them overtime whenever they work more than
40 hours in a workweek.
WHAT ARE YOUR OPTIONS?

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The first‐of‐its‐kind, award winning suite of intelligent applications
delivering expert guidance at internet speed and scale
THE FLSA SMART SOLUTION

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Salary or Overtime Pay?
The OT Cost Estimator can help you decide:
 How much will it cost to increase salary and
maintain the exemption?
 How much would it cost to pay overtime?
 How can I minimize increases in labor costs?
OT COST ESTIMATOR

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OT COST ESTIMATOR

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WHAT ELSE DO I NEED TO DO?
1. Conduct a review to identify employees
who may not meet the duties tests
required for exemption
2. Develop new compensation plan for the
reclassified employees
3. Review wage-hour policies and processes
4. Communicate the changes
5. Train the reclassified employees and their
managers

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Exempt or Non‐Exempt?
 Online exemption analysis
 Expert level guidance on exemption decisions
 Assessment in as little as 15 minutes
 Tool applies federal and state exemptions tests,
and over 2,000 reported court decisions and DOL
opinion letters
 Provides suggestions to lower risk of
misclassification
NAVIGATOR OT

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GETTING STARTED

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HOW IT WORKS

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BUILDING & TESTING THE APP

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SCREENING FOR EXEMPTIONS

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IDENTIFYING JOB DUTIES

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DETERMINING DISCRETION

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FINAL REPORTS

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ADDITIONAL RESOURCES

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 The new law provides a unique opportunity to get your house in
order
 Through traditional methods, exempt audits are costly & time
consuming – can take up to 6 months
 Change management/communications take time
 Diagnose your vulnerabilities quickly and cost effectively
WHY SHOULD I USE NAVIGATOR OT?

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Effective date for compliance
W
Use Navigator OT and OT Cost Estimator
DOL published the new overtime regulations
TIMELINE & NEXT STEPS
Now
May 18, 2016
December 1, 2016

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QUESTIONS & ANSWERS

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TAMMY’S GOLDEN RULE

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THANK YOU
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