With the new Overtime Pay rules going into effect soon, it is time for employers to gear up and make the accommodations necessary to make sure they paying their employees correctly. Here are all of the ways that the new Overtime Pay rules will effect your company and what you can do to prepare for them.

1. Significant Changes To Overtime
And How They Will Impact You
301 S. Polk, Suite 422
Amarillo, TX 79101
(806) 220-0150
adair@adairbuckner.com
www.adairbuckner.com
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2. Exemption from Overtime
 New minimum salary= $47, 476 ($913
per week)
 No changes to duties test
 3 year automatic increases
 Ability to count nondiscretionary
bonuses, commission and incentive
payments
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3. Federal Exemptions
Minimum Wage &
Overtime/Records
 Executive
 Administrative
 Professional
 Highly Compensated
 Outside Salesman
Overtime Only
 Retail or service--
commission paid (subject to
minimum pay rules)
 Computer Professional
(subject to minimum pay
rules)
 Motor Carrier
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4. Retail or Service Commissioned
Exemption
The FLSA also has an exemption from the overtime
pay requirements for certain commission employees
of a retail or service establishment. For this
exemption to apply, three requirements must be met:
(1) The employee must be employed by a retail or
service establishment;
(2) The employee’s regular rate of pay must exceed
one and one half times the applicable minimum
wage;
(3) more than half of the employee’s total earnings in
a representative period must consist of commissions
on goods and services.
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5. Three Factors To Look At To
Determine Exemption
• How is the employee paid?
• How much is the employee paid?
• What does the employee do?
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6. The employee must be:
1. paid by a salary,
2. must make a minimum of $913 per
week, 3. and must meet all of the
qualifications of one of the duties to be
classified as exempt.
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7. The Duties Test
1. Executive
2. Administrative
3. Professional
4. Highly Compensated Employees
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8. CAUTION!
EXEMPT
Only means that these employees generally meet all
the criteria and are generally exempt from overtime.
NOT EXEMPT
Only means that these employees generally do not
meet the criteria for this exemption and generally are
not exempt.
WARNING! Job titles are not controlling
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9. Executive Exemption
• Receives a salary or guarantee of at least $913/week,
and
• Is in charge of a department or sub department, and
• Supervises the work of two or more full time
employees, or their equivalent and
• Has power to hire, fire, promote, or change status of
other employees or suggestions given particular
weight.
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10. Administrative Exemption
• Primary duty is performing non-manual work
related to management policies or general
business operations, and
• Exercise discretion and independent
judgement with little or no supervision, and
• Receives a salary or guarantee of at least
$913/wk.
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11. Professional Exemption
• Knowledge of an advance type in a field of
science or learning that is customarily
acquired by a prolonged course of specialized
intellectual instruction; or
• Invention, imagination, originality or talent in a
recognized field of artistic or creative
endeavor,
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12. Highly-Compensated Employees
• Performs office or non-manual work, and
• Is guaranteed total annual compensation of at
least $134, 004 per year, and
• Performs any one of the exempt duties of an
executive, administrative or professional
employees.
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13. Wage Calculation Issue:
Failing to pay all the overtime that is
due to an employee
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14. Calculating Overtime
(Premium)
1. Divide amount of salary, bonus, commission,
etc. received in a week by the hours worked
in the week.
2. Then take ½ of that figure times the number
of overtime hours.
3. That gives you the additional overtime due.
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15. Example
• Warranty Administrator is paid salary of
$600/wk. plus monthly bonus of about
$700/month
• She works 50 hours a week
BUT she’s NOT EXEMPT!!!
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16. DOL’s calculation
• 2 years overtime on salary:
$6,240
• 2 years overtime on commission:
$1,680
TOTAL DUE: $7,920
* DOL may push for 3 years in future
investigations.
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17. Private Lawsuit Calculation
3 years overtime on salary: $9,
360
3 years overtime on commission: $2,
520
Liquidated damages:
$11,880
Attorneys fees: $25,000
TOTAL DUE: $48,760
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18. Payroll Practices: Red Flags
Watch out for “red flags” regarding payroll practices:
• Improper deductions from salaried employees
• Improper calculation of “regular rate”
• Job descriptions for exempt employees that do
not reflect exempt duties
• Nonexempt employees working through meal
breaks
• Employees who routinely stay late but have no
overtime
• Not complying with employer’s own written
policies
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19. Commission-Paid
Exemption
• Employed at a “retail” establishment, and
• Receives the majority of his/her
compensation from “commissions”, and
• Receives at least time and one-half minimum
wage for all hours worked in an overtime
week
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20. Changes to Motor Carrier Act
Exemption
• Before 2005, the FLSA’s motor carrier exemption
applied to all employees who drove a motor vehicle in
interstate commerce regardless of the size of the
motor vehicle or the number of passengers
transported in the vehicle.
• As of August 10, 2005, the motor carrier exemption
only applies to drivers of vehicles that weigh in excess
of 10,001 pounds.
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21. Changes to Motor Carrier Act
Exemption (continued)
Bottom Line
 Employees who deliver non-
hazardous materials in vehicle
weighing less than 10,001 pounds
(which includes cars and most light
trucks) are no longer exempt because
they do not drive commercial motor
vehicles.
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22. “Are they exempt from overtime?”
• What does the employee spend the majority
of his time doing?
• How is employee’s pay plan structured?
• Does employee fit exactly into one of the nine
exemptions?
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23. Irrelevant Factors
• Employee is paid a salary – unless meets
other factors for total compensation and
duties test
• “We consider employee a manager”
• Employee could supervise someone
sometimes
• “When employee was hired, we agreed no
overtime would be due”
• “We give them comp time when they work
over 40 hours” – Private employers cannot do
this.
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24. Common Classification
Mistakes
• Treating trainees as exempt before they fully
qualify as exempt
• Failing to guarantee the proper minimum salary
• Prorating the salary of a part-time exempt
employee to less than $913/week
• Making improper deductions from salaries of
exempt employees
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25. If an employee is not
exempt from overtime…
The employer must pay overtime premium on all
compensation the employee receives
$ Hourly wages
$ Salary
$ Commissions
$ Bonuses
$ Spiffs
$ Payments from the manufacturer
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26. Options for Dealing with
New Exemption Rules
• Increasing salary to meet standard salary level threshold;
• Converting to non-exempt and paying overtime;
• Lowering base wages to take overtime into consideration;
• Slowing the hiring of full-time workers;
• Hiring additional workers, especially part-time;
• Considering non-discretionary and commission payouts that
may now be counted toward the salary threshold with some
limitations;
• Reviewing incentive eligibility, targets and funding
mechanisms to address new regulations, help offset cost
increases and remain competitive.
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27. Questions and Answers
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28. Contact Information
www. adairbuckner.com
adair@adairbuckner.com
806-220-0150
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