The document discusses upcoming changes to the Fair Labor Standards Act (FLSA) regarding exemptions from overtime pay for white collar workers. Beginning December 1, 2016, the salary threshold for exempt employees will increase from $455/week to $913/week. Employers will need to ensure exempt employees meet the new salary level or reclassify them as non-exempt and pay overtime. The regulations will be automatically adjusted every three years to keep pace with inflation. Employers should analyze their current classifications and compliance in light of the changes.

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Countdown to FLSA Compliance
George A. Reeves III
greeves@fisherphillips.com
Phone: (803) 255-0000

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Overview
• FLSA requires:
• Payment of minimum wage
• Payment of overtime for hours worked over 40
• Record keeping requirements
• Minimum wage and overtime requirements do not apply to
exempt employees
• Certain requirements must be met
• Paid a sufficient weekly salary
• Perform certain job duties
• Default rule: Everybody is non-exempt, unless an exemption
clearly applies

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What is Changing?
• Salary level for exemptions from FLSA overtime requirement
for “white collar” exemptions
• Executive
• Administrative
• Professional
• Highly Compensated Employee
• Other exemptions are not impacted
• Outside sales
• Computer employees
• Etc.

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New Salary Level
• White Collar exemptions:
• Current salary level = $455 per week ($23,660 per year)
• New salary level = $913 per week ($47,476 per year)
• Previously exempt employees who do not meet the new
salary level are entitled to overtime for all hours worked
over 40 in a workweek
• Highly Compensated Employees
• Current salary level = $100,000 per year
• New salary level = $134,000 per year

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When Will This Happen?
New regulations are set to take effect December 1,
2016
Salary level will automatically increase every 3 years
150 days notice
First increase in 2020
Increase will equal 40th percentile of earnings of full-
time employees in lowest wage Census Region
(South)
No real chance changes will be delayed/repealed

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What Is Changing?
 Employers will be able to satisfy up to 10% of the salary threshold
from "nondiscretionary bonuses and incentive payments“
 Includes commissions
 Can count only those paid quarterly or more frequently
 Weekly salary must be at least $821.70/week (90% of $913)
• Permits employer to make a “catch-up” payment within one pay
period at the end of each quarter
 Cannot do this as to the salaries of employees treated as exempt
under the "highly compensated" exception

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Any Exceptions?
 No, for the most part
 Time-Limited Non-Enforcement Policy for "providers of
Medicaid-funded services for individuals with intellectual or
developmental disabilities in residential homes and facilities
with 15 or fewer beds"
 Separate USDOL materials on non-profits, governments,
higher education provide no exceptions but expand upon
USDOL's views

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What Should You Do?
 Immediately evaluate exempt employees' current status,
develop action plan
 Continue to treat some or all as "white collar" exempt?
 Treat as exempt on some other basis?
 Consider the FLSA alternatives (but don't forget the applicable
laws of other jurisdictions)

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Are They Really Exempt?
 Default position: Each employee is non-exempt, that is, each
is subject to FLSA's requirements
 Exemptions are strictly interpreted
 Specific requirements apply
 The employer has the legal burden to prove when challenged
that each one is met
 Otherwise, the employer loses

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Are They Really Exempt?
 Exemptions relate to individuals – Not to job descriptions, pay
classifications, positions, job groups, conventional wisdom,
etc.
 Detailed, accurate, current job information is essential
 Must be based upon actual work, real facts
 Opponents will dig-into what the employees actually do
 Job descriptions alone do not "make employees exempt"

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Course of Action
• Right now, you should:
• Analyze whether the requirements for the “white collar” exemptions
you have been relying upon are met;
• Evaluate what might be changed about one or more jobs so that the
incumbents may be treated as exempt in the future;
• Consider the possible application of alternative FLSA exemptions;
and
• Develop FLSA-compliant pay plans for employees who have been
treated as exempt but who will no longer.
www.laborlawyers.com

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What Are My Options?
Raise salaries to maintain exemption
Convert to non-exempt, pay hourly and pay
overtime after 40 hours
Pay salary with overtime after 40 hours
Reorganize workloads, adjust schedules or
spread work hours
Hire additional/part-time employees

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Can I . . .
• Set a salary that includes some overtime “built in?”
• Technically – yes
• Practically – high risk of noncompliance
• Prohibit/Limit overtime?
• Yes
• Must pay OT even if not authorized
• Treat some employees in same job as exempt and others as
non-exempt?
• Yes
• Beware of wage disparity

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Timekeeping
• FLSA requires employer to keep records of how many hours
overtime-eligible employees work
• Employers may use any method they choose for recording
hours
• But MUST be
• Accurate
• Complete
• Employer may use their own system or require employee to
keep track
• “Punch in/punch out” times are not required

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Accurate Timekeeping
 If non-exempt, must keep accurate records of worktime:
 Know everything that counts
 Have a system and policies for capturing the time accurately
 Train employees to follow
 Train supervisors/managers to enforce
 Periodically see whether the time records appear to be accurate
 BEWARE OF “OFF THE CLOCK” work

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Final Questions
Presented by:
George A. Reeves III
E-mail: greeves@fisherphillips.com
Phone: (803) 255-0000