New Overtime Regulations: Now What? Presented by Scott B. Mario King & Spalding LLP Firm/ Corp Logo
New Overtime Regulations: Now What?
Presented by
Scott B. Mario
King & Spalding LLP
Firm/ Corp Logo
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Legal Information:
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Overview
FLSA basics The new FLSA regulations Reclassifying employees Compensating non-exempt employees Alternative workers: independent contractors,
volunteers and interns
Fair Labor Standards Act (“FLSA”)
Passed during the Great Depression Three components:
• Child labor • Minimum wage • Overtime
Basic Overtime Requirements
Employer must pay overtime wages at the rate of 1 ½ times an employee’s regular hourly rate for all hours worked over 40 in a workweek
Employer must keep accurate records of all time worked
Exempt vs. Non-Exempt
Exempt: exempt from FLSA’s minimum wage and/or OT provisions • Must fit within one of the specific exemptions created
by Congress (e.g., executive, administrative, professional)
Non-Exempt: not exempt from FLSA’s minimum wage and/or OT provisions
Unusual FLSA Exemptions Employees engaged in the
catching or harvesting of fish, shellfish, crustaceans, sponges or seaweeds
Movie theater employees Homeworkers engaged in
the making of wreaths composed principally of natural holly, pine, cedar or other evergreens
Three Requirements to be Exempt
Duties – Employee must perform job duties that satisfy the duties test for the applicable exemption
Salary basis – Employee must be paid on a salary basis (subject to some exceptions)
Salary level – Employee must be paid at or above the minimum salary level established by the DOL (subject to some exceptions)
New FLSA Regulations
Were supposed to take effect Dec. 1, 2016 Double the minimum salary level (from $23,660
per year to $47,476 per year) Minimum salary level will adjust automatically
every 3 years
What Happened?
States and business groups sued to block the new regulations from going into effect
Federal judge issued preliminary injunction on Nov. 22, 2016
What Comes Next?
DOL has appealed to the U.S. Court of Appeals for the Fifth Circuit
Case may head to U.S. Supreme Court
Possible action by Congress
Possible action by new Labor Secretary
What Should You Do Now?
Wait until the dust settles Raise salary to new minimum salary level Reclassify employees from exempt to non-
exempt
Wait Until the Dust Settles
Explain that the new overtime rule was to take effect December 1.
Explain that a court has issued an order that has temporarily stopped the new rule from going into effect.
State that your organization will continue to monitor the status of the new rule, but in the meantime it will comply with the law that is currently in effect.
Raise Salary to New Minimum Level
Recall that all 3 tests must be met for exemption to apply:
Salary basis Salary level Duties
Reclassify Employees
Hourly non-exempt Salaried non-exempt Fluctuating workweek
Hourly Non-Exempt
Example 1: Employee earns $31,200 per year ($600/wk.) and works 40 hours per week
• Annual Salary ÷ 2080 = Hourly Rate • $31,200 ÷ 2080 = $15 per hour • $15 per hour × 40 hours = $600
Hourly Non-Exempt
Example 2: Employee earns $31,200 per year ($600/wk.) and works 45 hours per week
• $15 per hour × 40 hours = $600 straight time pay • $15 × 1.5 × 5 = $112.50 overtime pay • Total earnings = $712.50
Hourly Non-Exempt
Example 3: Employee earns $31,200 per year ($600/wk.) and works 45 hours per week
• Weekly Salary / (40 + (OT Hours × 1.5)) = Hourly Rate
• $600 / (40 + (5 × 1.5)) = $12.63 • $12.63 per hour × 40 hours = $505 straight time pay • $12.63 × 1.5 × 5 hours = $95 overtime pay • Total earnings = $600
Salaried Non-Exempt
Example: Employee earns $31,200 per year ($600 per week / $15 per hour) Employee works 36 hours
• Total earnings = $600 Employee works 40 hours
• Total earnings = $600 Employee works 45 hours
• Total earnings = $712.50 ($600 straight time pay + $112.50 overtime pay)
Fluctuating Workweek
Employee is paid a fixed amount as straight time pay for all hours the employee works in a workweek
Employee is paid overtime at the rate of ½ (rather than 1 ½) times the employee’s regular rate of pay
Employee’s hourly rate fluctuates depending on number of hours worked: the more the employee works, the lower the employee’s hourly rate
Fluctuating Workweek
• Employee’s hours must fluctuate from week to week
• Requires a clear mutual understanding
• Can be difficult to administer – employee’s hourly rate must be calculated each week
• Consult with counsel!
Managing the Changes
Control overtime hours • Adjust work hours to focus on critical periods • Flextime – not the same thing as comp time!
Redistribute workload • Hire additional employees • Push work to part-time employees • Use alternative workers
Breaking the News
Explain that a change in the law requires the organization to change the way it compensates certain employees.
Explain impact on pay and benefits – stress that employee will not experience any decrease in pay assuming employee continues to work same number of hours.
Emphasize that the change to non-exempt status is being driven by new OT rule and is not a demotion in any way.
Train employees on relevant policies (timekeeping, OT, breaks, etc.).
Compensating Non-Exempt Employees
Time worked Breaks Training and meetings Travel time
Time Worked
Basic principles: Employee must be paid for all time that the employee is
required to be on duty, on the employer’s premises, or at any other prescribed place of work.
This includes time that the employee is “suffered or permitted” to work – even if the employee is off the clock.
Copyright © 2016 CFODailyNews.com
Breaks
20 minutes or less Must be paid
30 minutes or longer Can be unpaid as long as the employee is completely relieved of duty (no answering phones or emails)
Training and Meetings
Must be paid unless all four of the following requirements are met: • Attendance is outside regular working hours • Attendance is voluntary • The training/meeting is not job related • The employee does not perform any productive work
during the training/meeting
Travel Time Compensable:
• Travel between job sites during the work day • Travel to another city for special one-day assignments (although
normal commuting time can be excluded) • Overnight travel, if during the employee’s normal work hours (on
a work or non-work day) Not Compensable:
• Normal home-to-work commuting, unless employee begins work prior to commuting
• Overnight travel, if outside the employee’s normal work hours (on a work or non-work day)
What the FLSA Does Not Require
Breaks Vacation/PTO, sick leave, holidays Extra pay for working nights, weekends or
holidays simply for working at those times Extra pay for working more than 8 hours in a day
Alternative Workers: Independent Contractors, Volunteers and Interns
Pros: • Flexibility • Not covered by FLSA and other employment laws
Cons: • If worker is misclassified, employer can be liable for
back pay, back taxes, lost benefits, contributions for unemployment insurance, fines and penalties
• Not covered by workers’ comp
Independent Contractors
Some factors: • Degree of control – How the job is performed vs. the
end result • Skill/independent judgment required • Who provides equipment/tools to do the job • Whether services rendered are an integral part of the
organization’s business • Length of relationship
Volunteers
A “volunteer” is someone who works freely without compensation or expectation of compensation.
• Employees cannot volunteer to perform the same or similar duties they are paid to perform as employees.
• Employers cannot direct employees to perform volunteer work during the employee’s normal working hours, even if the duties are not the same.
Interns
Six factors: 1. Internship is similar to training provided in an educational environment. 2. Intern is the primary beneficiary of the internship. 3. Regular employees are not displaced by the intern; instead, the intern
works under their close supervision. 4. Employer derives no immediate advantage from the internship; instead,
the internship may impede operations. 5. Intern is not necessarily entitled to a job when the internship ends. 6. Both the employer and the intern understand that the internship is
unpaid.
Questions?
For More Information:
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