DOL’s New Overtime Rules Wednesday, August 19, 2015 Presented By the IADC Employment Law Committee Welcome! The Webinar will begin promptly at 12:00 pm CDT. Please read and follow the below instructions: • For you information, this Webinar presentation is being recorded. • If you have not already done so, please join the conference call. • Mute your phone line. If you do not have a mute button or are on a cell phone, press *1 to mute your phone. • If you are on a conference phone, please move all cellular or wireless devices away from the conference phone to avoid audio interference. • If you have questions during the presentation, you may utilize the Q&A pod on the upper-right-hand side of your screen. You may type questions here and it will be sent to the presenter for response. If your question is not answered during the presentation, our presenter will answer questions at the end of the webinar. • Visit the “Files” pod in the lower-right-hand corner of the screen if you would like to download a copy of this PowerPoint presentation.
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Transcript
DOL’s New Overtime Rules
Wednesday, August 19, 2015
Presented By the IADC Employment Law Committee
Welcome! The Webinar will begin promptly at 12:00 pm CDT. Please read and follow the
below instructions:
• For you information, this Webinar presentation is being recorded.
• If you have not already done so, please join the conference call.
• Mute your phone line. If you do not have a mute button or are on a cell phone, press *1 to mute your
phone.
• If you are on a conference phone, please move all cellular or wireless devices away from the conference
phone to avoid audio interference.
• If you have questions during the presentation, you may utilize the Q&A pod on the upper-right-hand side
of your screen. You may type questions here and it will be sent to the presenter for response. If your
question is not answered during the presentation, our presenter will answer questions at the end of the
webinar.
• Visit the “Files” pod in the lower-right-hand corner of the screen if you would like to download a copy of
this PowerPoint presentation.
Type your questions for presenters here in the Q&A Pod
Click on the file name to download this Power Point or any referenced documents
IADC Webinars are made possible by a grant from The Foundation of the IADC.
The Foundation of the IADC is dedicated to supporting the advancement of the
civil justice system through educational opportunities like these Webinars. For more
information on The Foundation, visit www.iadcfoundation.org.
• Coverage– Applies to “employees”– Two Types of Employer Coverage
• Enterprise Coverage• Individual Coverage
FLSA Overtime Requirements
• Covered nonexempt employees must receive 1 ½ times their “regular rate of pay” for all “hours worked” over 40 hours in a “workweek”
• Purpose?
– Apply financial pressure to spread employment
– Reduce overwork and its detrimental effect on worker health and well-being
Exemptions from Overtime
• Numerous exemptions created and repealed over the years
– Employees employed by a “motion picture theater” are exempt
– Employees employed in a “local retailing capacity” were exempt until repealed in 1961
– Teachers and academic administrative professionals were exempted in 1966.
– Certain computer professionals were exempted in 1990.
White Collar Exemptions
• Section 13(a)(1) of FLSA
– Included in FLSA as adopted in 1938
– Exempts from overtime and minimum wage requirements any employee employed as a:• Bona Fide Executive
• Bona Fide Administrative
• Bona Fide Professional
• Outside Salesman
– Congress left it up to DOL to define what those terms mean
Overtime Exemptions
White Collar Exemptions
=Part 541 Exemptions
=EAP Exemptions
White Collar Exemptions
• Since 1940, the regulations have required each of 3 tests to be met for the white collar exemption to apply:
– Predetermined fixed salary not subject to reduction;
– Amount of salary must meet a specified minimum; and
– Employee’s job duties must meet the “duties test” for the exemption.
White Collar Exemptions 1949-2004
• 2 Different Duties Tests– Long Test
• Lower minimum specified salary requirement
• Detailed requirements for duties
• Included a limit on the amount of nonexempt work that could be performed – 20 percent for most workers
– Short Test• Higher minimum specified salary requirement
• Less onerous requirements for specified duties
• No cap on nonexempt work
August 2004 Regulatory Changes
• Eliminated the “long” and “short” dichotomy
• Implemented “standard duties”
– “Primary duty”
• “The principal, main, major or most important duty that the employee performs.” 29 C.F.R. §541.400(a)
• “Employees who do not spend more than 50 percent of their time performing exempt duties may nonetheless meet the primary duty requirement if the other factors support such a conclusion.” 29 C.F.R. §541.400(b)
• Established minimum salary of $455/week
– $23,660/year
• Created Highly Compensated Employee exemption
• Provided examples of exempt/nonexempt positions
Executive Exemption (since 2004)
• Paid on a salary basis
• Minimum salary of $455/week-$23,660/year– Pelosi Exception for Samoa
• Primary duty:– Management of enterprise or customarily recognized
department/subdivision;
– Customarily and regularly directs 2 or more FTEs; and
– Authority to hire/fire or whose suggestions/recommendations are given “particular weight”
Administrative Exemption (since 2004)
• Paid on a salary basis
• Minimum salary of $455/week-$23,660/year– Pelosi Exception for Samoa
• Primary duty:– Office or nonmanual work directly related to the
management or general business operations of the employer; and
– Exercises discretion and independent judgment with respect to “matters of significance”
Professional Exemption (since 2004)
• Paid on a salary basis
• Minimum salary of $455/week-$23,660/year– Pelosi Exception for Samoa
– Teachers
– Law/Medicine
– Computer Professionals
• $27.63/hour (6 ½ times minimum wage in 2004)
• Primary duty:– Learned professional;
– Creative professional;
– Teaching professional;
– Law/Medicine; or
– Computer professional.
Outside Sales Exemption (since 2004)
• No salary requirement
• Primary duty:
– Making sales; or
– Obtaining orders/contracts for services or use of facilities; and
– Customarily and regularly engaged away from employer’s place of business.
Highly Compensated Employee Exemption
• 2004 Regulations created new highly compensated employee exemption (HCE)
• Requirements:
– Salary
• Earn at least $100,000 in total compensation
– May include commissions and nondiscretionary bonuses
– Excludes board, lodging and other fringe benefits
– Duties
• Regularly perform any one or more of the exempt duties of an Executive, Administrative or Professional Employee
DOL’s Proposed Rule
• March 13, 2014– President Obama signed Presidential
Memorandum directing DOL to update FLSA overtime and minimum wage regulations
• July 6, 2015– DOL issued Notice of Proposed Rulemaking
• Comment Period– Comments must be filed on or before September
4, 2015
Key Provisions of Proposed Rule
• Increases minimum salary requirement– 40th percentile of earnings for full-time salaried workers
• 2013: $921/week, $47,892/year
• 2016 (est): $970/week, $50,440/year– Compare: Currently $455/week, $23,660/year
• Increases HCE salary requirement– 90th percentile of earnings for full-time salaried workers
• 2013: $122,148/year– Compare: Currently $100,000/year
• Indexes salary requirements on annual basis – Fixed percentage of wages or CPI-U
DOL Proposal
• New terminology
– Exempt
• Now “Not Overtime Protected” or “Overtime Ineligible”
– Nonexempt
• Now “Overtime Protected” or “Overtime Eligible”
The Other Shoe . . .
• DOL is seeking comment on whether to amend the “duties tests”
The Other Shoe . . .
• Tightening the Duties Test
– DOL loves the California standard!
• Overtime ineligible employee must spend at least 50 percent of their time performing their primary duty.
The Other Shoe . . .
• DOL is seeking comment on the treatment of nondiscretionary bonuses
The Other Shoe . . .
• Smart phone use is next!
Impact on Your Clients!
• DOL estimates
– 4.6 million currently exempt workers would become entitled to overtime protection in the first year
– 6.3 million white collar currently exempt workers would have their “overtime protection strengthened”
– Direct employer costs: between $239.6 - $255.3 million/year
Impact on Your Clients!
Suggested Strategies
• Likely effective date: January 2016• Consider submitting comments to DOL• Review every job/position