Overtime Presentation 9 2016 2

Paying Overtime Under the Fair
Labor Standards Act
Note: This PSHR presentation should not be considered in any way to replace or serve as legal counsel or assume liabilities associated
with your compliance with the FLSA..
U.S Department of Labor
Overtime Rule Changes

Paying Overtime Under FLSA
Pre – Seminar Questions:
1. T/F Employers that employ less than 50
employees are not required to comply with the new
FLSA rules?
2. T/F To be classified as Exempt in the future,
employees must be paid at least $913/wk or $47,476
annually?
3. T/F Auditing your pay practices/levels of pay
for Exempt and Non-Exempt employees is the first
step in determining whether you meet the new
FLSA rules?
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4.If you determine that you are not in
compliance, what are your five (5) options to
meet the FLSA’s new Overtime rules?
5. T/F The FLSA rules require employers to
convert a salaried worker/Exempt making less
than the new salary threshold to
hourly/Nonexempt status?
6. T/F The FLSA rules establish a
mechanism for automatically updating the
salary/compensation levels every three (3)
years, beginning on January 1, 2020?

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7. T/F The FLSA rules amend the regulations to allow
employers to use nondiscretionary bonuses, incentives and
commissions to satisfy 10% of the new standard salary level, so
long as employers pay those amounts semi-annually?
8. T/F When both the FLSA rules and state law apply, the
employee is entitled to the most favorable provisions of each law?
9. T/F Repeated or willful violations of the new FLSA Overtime
rules will be subject to a penalty of up to $1,894 per violation.
10. T/F Effective December 31, 2016, the final Department of
Labor (DOL) rule updates the regulations governing executives,
administrative and professional employees are entitled to overtime
pay protection.

The New FLSA Rules – Why?
Brief History:
 More than 75 years ago, the Fair Labor Standards Act of 1938
established rules governing overtime; workers must be paid
“time and a half” for each hour worked per week above 40 hours.
 The terms Exempt and Non Exempt were created to describe
those covered by the overtime rules based on a specific weekly
compensation level/salary test and a managerial/executive
authority/duties test.
 Since 1975, the weekly compensation level has only been
adjusted once and - to reflect changes in the cost of living.
 Therefore, in the interest of clarity and meeting FLSA goals to
reduce unemployment, prevent excessive overtime and fairly
compensate workers’ who do work overtime, the new rules were
established.
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The New FLMA Rules:
 Effective date December 1, 2016
 Raises the salary threshold from $455/wk to $913/wk (or annual pay of $47,476)
for a full-year worker
 Sets highly-compensated employee (HCE) total annual compensation level equal
to $134,004 annually
 Establishes a mechanism for automatically updating the salary and
compensation levels every 3 years, beginning on January 1, 2020
 Amends the regulations to allow employers to use nondiscretionary bonuses,
incentives,, and commissions to satisfy up to 10% of the new standard salary
level, so long as employers pay those amounts on a quarterly or more frequent
basis.
 When both the FSLA and state law apply, the employee is entitled to the most
favorable provisions of the law.
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Options for compliance: Employers have certain options for responding to the changes to salary level, however the
Department of Labor (DOL) does not dictate or recommend any method.
Options for employers include:
1. After evaluation, you determine that no changes are necessary. You find a small number (normally less
than 10%) of your employees that are currently classified as Exempt that fall below the new $913/week,
$47,476 annual salary level. None of these individuals which would change to Non Exempt work overtime.
2. Provide pay raises to employees that fall below the $913/week, $47,476 annual salary level, so that they
meet/exceed the Standard Salary Level Test as of December 1, 2016. As an exempt employee there is no
verifiable documentation/time records requirement.
3. Pay overtime to those who do not fit the new Standard Salary Level Test, even though they continue to meet
some aspects of the Standard Duties Test; As a non-exempt employee this solution requires verifiable
documentation/time records.
4. Reorganize workloads, adjust schedules or spread work hours in order to comply with new FLSA Final
Rules to avoid unnecessary overtime costs. Reduce or eliminate work hours of individual employees that do
not meet the Standard Salary Level Test but are working over 40 hours/week and no overtime is currently
being paid; this solution requires well written policies and procedures that define what is approve and not
approved overtime, verifiable documentation/time records required.
5. Adjust wages by adjusting the amount of an employee’s earnings to reallocate it between regular wages and
overtime so the total amount remains the same. Lower annual salary so that expected OT combined with
lower salary equals the same budgeted annual salary.
Standard Salary Level Test: $913/wk, $47,476
Standard Duties Test: Employee manages department, exercises discretion and independent judgement to
matters of significance and/or require knowledge in a field of science or learning.
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The Ohio State University Strategy
(Reported by Columbus Business First, Sept 2, 2016)
Background:
OSU has 2,979 (of it’s total 38,134) employees that will be effected by the new Overtime Rules.
Solution:
 Most employees currently classified as Exempt who fall below the new salary minimum/$47,476 will be
converted to hourly pay.
 Affected employees will be given 30 days’ notice before their status is switched
Challenges:
 Biggest change will be moving this group to biweekly paychecks
 2016 budgets do not take into account overtime for this group; 2017 budgets will. If an employee work
only 1 OT hour/month/employee, the cost to OSU is expected to be $1.2 million/yr; 20 OT
hours/month/employee would be $24 million.
 Managing OT costs along with payroll; increase salaries/payroll means increased OT costs
 Employees in the 2, 979 current exempt classification that are kept as exempt can not show discrimination
of a protected class; if everyone is changed to non-exempt there is no problem.
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Example – What would you do?
Case: Operations manager is paid a salary of $45,000/yr. Her job
duties meet the Standards Duties Test to be exempt. Her job
requires regular weekly overtime. The employer may choose to
raise the manager’s salary to at or above $47,476/yr to maintain
the manager’s administrative exemption.
What would you do, given your three options?
1. Provide Pay Raise to at least $47,476 which would make her
Exempt (or)
2. Make her Non Exempt, reduce work hours, 40 or less thus
eliminating overtime (or)
3. Make her Non Exempt, pay approved overtime
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Example - What would you do?
A current department manager who has worked for you for
20 years as an exempt employee. His duties meet the
Standards Duties Test requirements most of the time and his
pay is $42,000/yr. He rarely works more than 40-hours in any
given week.
What would you do, given your two options?
1. Provide a pay raise to at least $47,476 which would make
him Exempt (or)
2. Make him Non Exempt, Pay OT should he work approved
overtime.
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 Questions from Participants
Question 1- What and where does start-time begin when an agency does not have a
time clock? For example, if an hourly, non-exempt employee gets to parking lot at
8am but does not enter office space until 8:10am when is the start-time? Will an
employee be covered by workers’ comp if they fall coming into or leaving the
building; if yes, does that mean the time must be counted as work time?
Answer – Start time under Ohio Employment Law would be considered when an
employee begins activities that would be considered integral to their principle
activity; so walking into work from the parking lot would not qualify as time worked.
An employee falling coming into work would not necessarily be covered under
Workers’ Compensation coverage.
Recommend - Update or write Policy on rules governing work starting times.
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Question 2 – If hourly, non-exempt employees arrive 30-minutes
prior to their start time and sit in parking lot or sit at his/her desk
without starting work could that be construed as he/she started
work? Is there a set amount of time an hourly employee cannot
come early to the office? Example – if they come and socialize with
co-workers 10 minutes prior to the designated start time is that
permissible?
Answer – Follow answer to Question 1
Recommendation – Same as Question 1; also part of the Policy
should state person can not clock-in or out and later than 15
minutes before or after completion of regularly scheduled work
hours.
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Question 3 – Will the honor system be a good enough
tool to determine start and end time?
Answer – No. Should you be audited by the Ohio Wage
and Hour Department, they will be looking for start and
end of work records to determine whether your
business is in compliance. Absent these records your
business will face considerable finds.
Recommendation – Create Time Record System either
a paper system/time cards or electronic system/time
clock.
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Question 4 – What qualifies individuals as employees vs. independent contractor? Is
there an easy way to distinguish between the two?
Answer - An independent contractor has control of their work time/scheduling of
there work for your business. If you treat an individual classified as an independent
contractor like an employee, by requiring when they start /end work, attend regular
company meetings, pay and benefits provided as you do for your regular
employees, etc. you would be in violation. This issue is often audited by the Ohio
Wage and Hour Department; they feel classifying an employee as an independent
contractor is done to avoid paying the required employment taxes. If found to be in
violation, penalties can be severe.
Recommendation - Review and/or write policy that defines what an independent
contractor is or is not. Should you currently have independent contractors, you
should audit their working relationship to ensure you are in compliance.
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Question 5 – Paying exempt employees:
1. If an exempt employee schedules time-off during the work week for personal
reasons, is it allowable to dock their PTO Bank accordingly?
2. If they have no PTO available, do we still have to pay them for the time they have
scheduled-off during the work week?
3. If we require staff to work a minimum of 40 hours/wk, how and where do we
indicate that?
4. We offer “employment at will”, so should we have exempt employees sign a
statement recognizing this expectation?
Answers –
1. Yes but not there regular pay.
2. Yes, as you regularly do.
3. Revise and/or write Policy; make part of Employee Handbook.
4. Make part of Employee Handbook which should require confirmation/signature
that they read and understood Handbook material.
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Question 6 – How do you calculate employee time for
overnight events such as a conference?
Answer – Non-exempt employees in this situation would
be paid their normal hours (i.e. 8am to 5pm, 8-hours for
a day). However, if the conference has meeting that
exceed the normal 8-hour day you may be required to
pay them for this time.
Recommendation – Request written documentation
from employee of hours of conference participation,
then pay accordingly.
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Question 7 - Under the new FLSA
Overtime rules what is the salary
exemption amount for the Executive
Director/CEO?
Answer – the Final Rules raise the
compensation level for highly
compensated employees to $134,004.
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