Significant changes to overtime regulations may 25 2016

Exempt vs Non-Exempt

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Significant Changes to Overtime Regulations and how they will Impact You

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• 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

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.

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.

The Duties Test

1. Executive2. Administrative3. 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.”

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!

• 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

Executive Exemption

EXEMPT

DealerDep’t Manager

NOT EXEMPT

Ass’t ManagerCSI Manager Lot Manager Inventory ManagerFinance Manager

• 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

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.


EXEMPT

Used Car Buyer Human Resources

Manager Office Manager

NOT EXEMPT

Office employeesWarranty Admin.Accounts PayableRental clerkBookerDispatcher


EXEMPT

Used Car Buyer Human Resources

Manager Office Manager

NOT EXEMPT

Office employeesWarranty Admin.Accounts PayableRental clerkBookerDispatcher


• 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.


EXEMPTGraphic ArtistTeacherAttorney Doctor

NOT EXEMPT

Marketing Coordinator

• 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

Wage Calculation Issue:

Failing to pay all the overtime that is due to an employee

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!!!

DOL’s calculation

2 years overtime on salary:$6,240

2 years overtime on commission: $1,680

TOTAL DUE: $7,920

Private Lawsuit Calculation

3 years overtime on salary: $9,3603 years overtime on commission: $2,520Liquidated damages: $11,880Attorneys fees: $25,000TOTAL DUE: $48,760

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


Using a poorly-drafted pay plan

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.

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


Promising an employee a “guarantee”

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?


Treating employees as “independent contractors”

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

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

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

Federal versus State Law

• Federal law does not preempt state employment laws

• Employees are entitled to the provision most favorable to them

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

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

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

Partial Exemptions(OVERTIME only)

• Salesman• Partsman• Mechanic• Commission-paid• Motor Carrier ???

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

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

EXEMPT

TechnicianTechnician traineeApprenticeBody manAfter-market installer

NOT EXEMPT

Quick lube mechanicDetailerNew car get readyPDI technician

Mechanic

Primary duty: performing mechanical or body repair work on a vehicle

Service Writers

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

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

Commission-Paid

EXEMPT

Finance ManagerPainterDispatcherService Foreman “Flat rate” detailerOther managers

NOT EXEMPT

Warranty clerk Office employees “Piece rate” detailer

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 LineEmployees 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.

Motor Carrier

EXEMPT

Dealer trade driver

Auction driver

Parts driver (possibly)

NOT EXEMPT

Courtesy van driver

“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?

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”

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

If an employee is not exempt from overtime…

The employer must pay overtime premium on allcompensation the employee receives

$ Hourly wages$ Salary$ Commissions$ Bonuses$ Spiffs$ Payments from the manufacturer

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Significant changes to overtime regulations may 25 2016

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