Overtime Rule Changes - Utah Nonprofits Association · 2018-07-02 · overtime protection. Salaried –a payroll method that may apply to both Non-Exempt and Exempt employees. Hourly

Online WebinarSponsored by the Alliance of Arizona Nonprofits

& McMinn HR™Presented by Ginny McMinn, MSIR, SPHR

July 26, 3016

Overtime Rule Changes

Why Now?Why Now?Why Now?Why Now?

� Last changed in 2004

� Current salary test level ($455 per week) is below poverty line for family of 4

� No longer serves as a valid “short cut” to determine exempt or non-exempt positions

Law, Regulations & EnforcementLaw, Regulations & EnforcementLaw, Regulations & EnforcementLaw, Regulations & Enforcement

Law is passed

Regulations are Issued

Law & Regulations are Enforced

Law, Regulations & EnforcementLaw, Regulations & EnforcementLaw, Regulations & EnforcementLaw, Regulations & Enforcement

Law is passed / Fair Labor Standards Act 1938 (FLSA)

Regulations are Issued / 2004 & now 2016

Law & Regulations are Enforced / Beginning 12-1-16

What Organizations are Covered?What Organizations are Covered?What Organizations are Covered?What Organizations are Covered?� 2 ways to determine

1. Enterprise Coverage � Private sector businesses with $500,000 in sales

� Federal, state and local governments

� Hospitals, medical/nursing care for residents, schools, and public agencies

� Nonprofit organizations with “business activities” such as gift shops or fees for services provided equaling $500,000 � Contributions, membership fees, many dues and donations (cash or non-cash) are not counted toward the $500,000 threshold

� Charitable activities do not count

What Organizations are Covered?What Organizations are Covered?What Organizations are Covered?What Organizations are Covered?2. Individual Coverage � Employees covered if

� They are engaged in interstate commerce� They are engaged in production of goods for interstate commerce

� Examples of activities:� Makes/receives interstate calls (to order goods, supplies or purchase food)

� Ships materials to another state� Transports persons or property to another state� Liberally interpreted, if regular activity (not isolated instance)

� Individuals may be covered, even if enterprise isn’t� Employees may not “volunteer” for their employer, even though the nonprofit employer may use volunteers

DefinitionsDefinitionsDefinitionsDefinitions� Non-exempt – employees eligible for minimum wage and overtime protection under the FLSA.

� Exempt – employees who are not eligible for minimum wage and overtime protection.

� Salaried – a payroll method that may apply to both Non-Exempt and Exempt employees.

� Hourly – a payroll method that typically applies to Non-Exempt employees.

� Work week – 7 day period for accumulation of hours & calculation of overtime (does not fluctuate).

� Overtime pay – unless exempted, employees must receive pay at 1.5 times regular rate of pay, for all hours worked over 40 in a workweek.

� Compensatory time – trading time off for overtime hours worked is only allowed for public sector employers.

What is changing?What is changing?What is changing?What is changing?

� Increased minimum salary level for Executive, Administrative and Professional Exemptions ($913 weekly/$47,476 /yr.)

� Increased guaranteed salary level for Exemption of Highly Compensated Individuals ($134,004)

� Automatic adjustments to salary levels every 3 years

� Including part of Bonus and Commission payments toward the minimum salary level

� New regulations are effective 12-1-2016 for most

� Medicaid-funded organizations are effective in 2020

What is NOT changing?What is NOT changing?What is NOT changing?What is NOT changing?

� Duties Tests

� Salary basis

� Timekeeping requirements

� Part-time employee requirements

� No salary level requirements for � Outside sales employees

� Teachers

� Practicing doctors and lawyers

� Regulations apply only to “white collar” exemptions� Executive, Administrative, Professional jobs (EAP)

� State Law considerations – best for employee

NonNonNonNon----Compliance PenaltiesCompliance PenaltiesCompliance PenaltiesCompliance Penalties

� Penalties and fines

� Back overtime pay – doubled or even tripled

� Jail time

3333----PartPartPartPart Basis for Exemption from OTBasis for Exemption from OTBasis for Exemption from OTBasis for Exemption from OT

1. Salary level ($47,476 effective 12-1-16)

2. Paid on Salaried Basis

3. Duties Test (not title)

Exemption Requirements*Exemption Requirements*Exemption Requirements*Exemption Requirements*Executive Administrative Professional

Salary Basis Test Employee must be paid on a salaried basis

Employee must be paid on a salaried basis

Employee must be paid on a salaried basis

Standard Salary Level Test

$913 per week ($47,476 per year)

$913 per week ($47,476 per year)

$913 per week ($47,476 per year)

Standard Duties Test

(Employee’s duties)

Primary duty must be managing the enterpriseor a recognized department or subdivision of it, and managing two or more employees.

Primary duty must include the exercise of discretion and independent judgmentabout matters of significance.

Primary duty must be to perform primarily work that requires• Advanced knowledge in a field of science or learning, or • Invention, imagination, originality, or talent in a recognized field or artistic or creative endeavor, and• Some computer workers.

*From Guidance on Non-Profit Organizations, Wage and Hour Division, May 18, 2016

OptionsOptionsOptionsOptions

� Raise employee salary to new minimum if duties requirements are met & issue pay on a salaried basis

� Pay overtime premium of 1.5 times regular rate of pay for hours over 40 per week

� Reduce base pay (staying above minimum wage) and allocate more budget toward overtime premium

� Some combination of these

• Source: Department of Labor/Wage and Hour Division

Implementation SuggestionsImplementation SuggestionsImplementation SuggestionsImplementation Suggestions

� Act – deadline is 12-1-16

� Document employee job duties

� Consider rearranging or eliminating job duties to reduce workload and hours

� Use the Duties Tests (next) to determine exemption status

� Communicate with employees impacted

� Implement policies and procedures

� Decide on how you will keep records

� Monitor results

Recordkeeping RequirementsRecordkeeping RequirementsRecordkeeping RequirementsRecordkeeping Requirements

� No specific form or time clock required

� Keep an accurate record of hours worked and pay earned

� Employee can record just the total hours worked (if accurate)

� Employee may still work flexibly, varying hours or working from home; hours must be recorded as daily total, weekly total and any OT

� Basic recordkeeping requirements under FLSA (Fact Sheet #21, dol.gov/wh)

Executive Exemption Executive Exemption Executive Exemption Executive Exemption

All of the following tests must be met:

� Paid on a salary basis at a rate of not less than $913/week

� Primary duty must be managing the enterprise or a recognized department or subdivision of the enterprise

� Customarily and regularly direct the work of 2 (or more) full time workers or FTE’s

� Authority to hire or fire other employees, or make recommendations about hiring, firing, advancement, promotions, or other change of status that are given particular weight.

Administrative Exemption Administrative Exemption Administrative Exemption Administrative Exemption

All of the following tests must be met:

� Paid on a salary or fee basis at a rate of not less than $913/week

� Primary duty must be performing office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers

� The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Professional Exemption Professional Exemption Professional Exemption Professional Exemption ---- LearnedLearnedLearnedLearned

All of the following tests must be met:

� Paid on a salary or fee basis at a rate of not less than $913/week

� Primary duty must be performing work requiring advanced knowledge, work that is predominantly intellectual and which includes regular exercise of discretion and judgment

� Advanced knowledge in field of science or learning

� Advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

Professional Exemption Professional Exemption Professional Exemption Professional Exemption ---- CreativeCreativeCreativeCreative

All of the following tests must be met:

� Paid on a salary or fee basis at a rate of not less than $913/week

� Primary duty must be performing work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

Computer Employee ExemptionComputer Employee ExemptionComputer Employee ExemptionComputer Employee Exemption

All of the following tests must be met:

� Paid on a salary or fee basis at a rate of not less than $913/week

� Employment as a a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field

� Primary duty must consist of� Application of systems analysis including consulting with users, to determine hardware, software or system specifications

� Design, development, documentation, analysis, creation, testing or modification of computer systems or programs or prototypes, based on user or system design specifications

� Design, documentation, testing, creation or modification of computer programs related to machine operating systems, OR

� A combination of these duties, requiring the same level of skills.• (DOL/WH Fact Sheet 17E)

Outside Sales ExemptionOutside Sales ExemptionOutside Sales ExemptionOutside Sales ExemptionAll of the following tests must be met:

� Primary duty must be making sales or obtaining orders or contracts for services or use of facilities, and

� Employee must be regularly engaged away from the employer’s place of business.

� This is unchanged from the previous regulations.

Highly Compensated ExemptionHighly Compensated ExemptionHighly Compensated ExemptionHighly Compensated Exemption

All of the following tests must be met:

� Must earn $134,004 (total compensation)

� With at least $913 per week on a salaried basis

� Work must be office or non-manual work and include at least one of the duties of the executive, administrative or professional duty tests for exemption

Additional ResourcesAdditional ResourcesAdditional ResourcesAdditional Resources

� Department of Labor, Wage and Hour Division www.dol.gov/whd : Final Rule, Explanations and Fact Sheets (#17 et al)

� AANP – recording, additional webinar (9-13) and break-out session at Annual Meeting (9-29)

� McMinn HR™, email [email protected] – questions, implementation