The document discusses changes to overtime regulations and how they will impact employees' exempt status. It explains the criteria for being exempt as an executive, administrative, professional, or highly compensated employee. It also covers partial overtime exemptions and provides examples of employees who may or may not qualify for different exemptions.

1. Exempt vs Non-Exempt
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Significant Changes to Overtime Regulations and how they will Impact You

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4. • Exemption from Overtime = $47,476 ($913 per week)
More than $455 but less than $913 will need to be reclassified
• No changes to duties test
• 3 year increases
• Ability to count bonuses, commissions and incentive
payments

5. Federal Exemptions
MINIMUM WAGE/ OVERTIME/
RECORDS
• Executive
• Administrative
• Professional
• Highly Compensated
OVERTIME ONLY
• Salesman
• Partsman
• Mechanic
• Commission-paid
• Motor Carrier
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; and (3) more than half of the
employee’s total earnings in a representative period must consist of commissions on
goods and services.

6. Three Factors
• How is the employee paid?
• How much is the employee paid?
• What does the employee do?
The employee must be paid a salary, must make a minimum of
$913 per week/ and must meet all of the qualification of one of
the duties test to be classified as exempt.

7. The Duties Test
1. Executive
2. Administrative
3. Professional
4. Highly Compensated Employees
“highly compensated employee” exemption under 29 U.S.C. §
541.601. The relevant section of the regulation reads: “An employee with
total annual compensation of at least $100,000 is deemed exempt . . . if the
employee customarily and regularly performs any one or more of the exempt
duties or responsibilities of an executive, administrative, or professional
employee.”

8. 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
CAUTION!

9. • Is in charge of a department or sub-
department, and
• Supervises the work of two or more full
time employees, and
• Receives a salary or guarantee of at
least $913/wk
Executive Exemption

10. Executive Exemption
EXEMPT
 Dealer
 Dep’t Manager
NOT EXEMPT
 Ass’t Manager
 CSI Manager
 Lot Manager
 Inventory Manager
 Finance Manager

11. • Primary duty is performing non-manual work
related to management policies or general
business operations, and
• Exercises discretion and independent
judgment with little or no supervision, (holds
a position of responsibility) and
• Receives a salary or guarantee of at least
$913/wk
Administrative Exemption

12. Professional Exemption
• Knowledge of an advanced 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.

13. Administrative Exemption
EXEMPT
 Used Car Buyer
 Human Resources
Manager
 Office Manager
NOT EXEMPT
 Office employees
 Warranty Admin.
 Accounts Payable
 Rental clerk
 Booker
 Dispatcher

14. Administrative Exemption
EXEMPT
 Used Car Buyer
 Human Resources
Manager
 Office Manager
NOT EXEMPT
 Office employees
 Warranty Admin.
 Accounts Payable
 Rental clerk
 Booker
 Dispatcher

15. Professional Exemption
• Knowledge of an advanced 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.

16. Professional Exemption
EXEMPT
 Graphic Artist
 Teacher
 Attorney
 Doctor
NOT EXEMPT
 Marketing
Coordinator

17. • 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
Highly-Compensated Employees

18. Wage Calculation Issue:
Failing to pay all the overtime that
is due to an employee

19. Example
 Warranty Administrator is paid salary of
$600/wk. plus monthly bonus of about
$700/mo
 She works 50 hours a week
But she’s NOT EXEMPT!!!

20. DOL’s calculation
2 years overtime on salary:
$6,240
2 years overtime on commission:
$1,680
TOTAL DUE:
$7,920

21. 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

22. 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

23. Wage Calculation Issue:
Using a poorly-drafted pay plan

24. Wage and Hour Aspects
• You can pay commissions weekly, bi- weekly,
semi-monthly or monthly.
• You must satisfy minimum wage on the same
basis: weekly, bi-weekly, semi-monthly or
monthly
• You can “loan” or advance a sales person money
to cover the minimum wage and then recoup it in
subsequent weeks or months
• You must pay for all hours worked: sales
meetings, off day deliveries, prospecting, etc.

25. Sales Pay Plans
• Put the pay plan in writing and reissue it
whenever you make a change
• All sales people should punch a time clock
• If they punch in but not out, make an
estimate of the hours actually worked and
calculate pay on that basis

26. Wage Calculation Issue:
Promising an employee a “guarantee”

27. What is a “guarantee” ?
A. A guarantee of a certain amount of pay?
B. A guarantee of employment for the entire
period of the guarantee?

28. Wage Calculation Issue:
Treating employees as “independent
contractors”

29. Who is an “independent contractor”?
• Not just because you don’t want to pay
benefits
• Factors to consider:
– The extent to which services rendered
by an individual are an integral part of
the principal’s business
– The permanency of the relationship
between the individual and the principal
– The amount of investment in facilities
and equipment by the individual
– The opportunities for profit or loss by
the individual and the method of
compensation

30. Who is an “independent contractor”?
• Factors to Consider:
– The degree of independent business organization and
operation by the individual
– The degree and nature of control of the individual by the
principal
– The degree of independent judgment exercised by the
individual who performs the services
– Performance of the same or similar services by the individual
for third parties in addition to the principal
– Employment of the individual by the principal in any other
capacity
– A comparison of the relationship to other independent
contractor operations of a similar nature in the industry
– The right of either party to terminate the relationship on short
notice without penalty

31. Time Records
• The employer shall maintain an accurate record of the
hours worked by each non-exempt employee each
day and each week
• The employer can delegate this duty to employees,
but it remains responsible for compliance
• No required format: Punched time cards, handwritten
time sheets, computer log, etc., so long as they are
accurate
• There is no fine for failing to require employees to
keep accurate records
• However, without good time records, you are at your
employees’ mercy
• Most accurate: Punched time card

32. Federal versus State Law
• Federal law does not preempt state
employment laws
• Employees are entitled to the provision
most favorable to them

33. State Wage Law Concerns
1. Higher minimum wages
2. Different or non-existent exemptions
3. Wage payment laws
4. Wage deduction laws
5. “Living wage” laws

34. Some Exemption Examples
• IL and NV do not recognize “partsman”
• MA does not recognize “s,p,m”, but has an
exemption for “garageman”
• NY recognizes “s,p,m” only if they receive 1½
times the NY minimum wage
• NV and CA require OT after 8 hours in a day

35. 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
– Nonexempt employees performing work before
or after they punch or log in/out
– Employees who routinely stay late but have no
overtime
– Not complying with employer’s own written
policies

36. Partial Exemptions
(OVERTIME only)
• Salesman
• Partsman
• Mechanic
• Commission-paid
• Motor Carrier ???

37. Salesman
EXEMPT
 Sales person
 Sales associate
 Internet sales person
 Service Writer
NOT EXEMPT
 After market sales
 Greeter
 Finance Manager
 Motorcycle salesman
 BDC worker
Primary duty: selling cars or trucks to the consumer

38. Partsman
EXEMPT
 Parts counter
 Shipping/receiving
 Mechanics’ counter
 Telephone sales
NOT EXEMPT
 Parts driver
 Parts inventory
(computer)
Primary duty: stocking, issuing, requisitioning or selling parts

39. EXEMPT
 Technician
 Technician trainee
 Apprentice
 Body man
 After-market installer
NOT EXEMPT
 Quick lube mechanic
 Detailer
 New car get ready
 PDI technician
Mechanic
Primary duty: performing mechanical or body repair work on a vehicle

40. Service Writers
The Department of Labor will no longer deny the
OT exemption for (service writers) FOH 24L04(k)
BUT
The courts are not in alignment on the service
writer/advisor exemption status

41. 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

42. Commission-Paid
EXEMPT
 Finance Manager
 Painter
 Dispatcher
 Service Foreman
 “Flat rate” detailer
 Other managers
NOT EXEMPT
 Warranty clerk
 Office employees
 “Piece rate” detailer

43. 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.
Bottom Line
Employees who deliver non-hazardous materials in
vehicles 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.

44. Motor Carrier
EXEMPT
Dealer trade driver
Auction driver
Parts driver (possibly)
NOT EXEMPT
 Courtesy van driver

45. “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?

46. 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”

47. Common Classification Mistakes
• Not considering differences in state and
federal salary and duties tests
• 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

48. 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

49. Questions and Answers
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50. Contact Information
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