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Countdown to FLSA Compliance

George A. Reeves IIIgreeves@fisherphillips.com

Phone: (803) 255-0000

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Overview

• FLSA requires:• Payment of minimum wage• Payment of overtime for hours worked over 40 • Record keeping requirements

• Minimum wage and overtime requirements do not apply to exempt employees

• Certain requirements must be met• Paid a sufficient weekly salary\• Perform certain job duties

• Default rule: Everybody is non-exempt, unless an exemption clearly applies

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What is Changing?

• Salary level for exemptions from FLSA overtime requirement for “white collar” exemptions

• Executive• Administrative• Professional• Highly Compensated Employee

• Other exemptions are not impacted• Outside sales• Computer employees• Etc.

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New Salary Level

• White Collar exemptions:• Current salary level = $455 per week ($23,660 per year)• New salary level = $913 per week ($47,476 per year)• Previously exempt employees who do not meet the new

salary level are entitled to overtime for all hours worked over 40 in a workweek

• Highly Compensated Employees• Current salary level = $100,000 per year• New salary level = $134,000 per year

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When Will This Happen?

New regulations are set to take effect December 1, 2016Salary level will automatically increase every 3 years

150 days noticeFirst increase in 2020 Increase will equal 40th percentile of earnings of full-

time employees in lowest wage Census Region (South)

No real chance changes will be delayed/repealed

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What Is Changing?

Employers will be able to satisfy up to 10% of the salary threshold from "nondiscretionary bonuses and incentive payments“

Includes commissions

Can count only those paid quarterly or more frequently

Weekly salary must be at least $821.70/week (90% of $913)

• Permits employer to make a “catch-up” payment within one pay period at the end of each quarter

Cannot do this as to the salaries of employees treated as exempt under the "highly compensated" exception

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Any Exceptions?

No, for the most part

Time-Limited Non-Enforcement Policy for "providers of Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities with 15 or fewer beds"

Separate USDOL materials on non-profits, governments, higher education provide no exceptions but expand upon USDOL's views

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What Should You Do?

Immediately evaluate exempt employees' current status, develop action plan

Continue to treat some or all as "white collar" exempt?

Treat as exempt on some other basis?

Consider the FLSA alternatives (but don't forget the applicable laws of other jurisdictions)

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Are They Really Exempt?

Default position: Each employee is non-exempt, that is, each is subject to FLSA's requirements

Exemptions are strictly interpreted

Specific requirements apply

The employer has the legal burden to prove when challenged that each one is met

Otherwise, the employer loses

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Are They Really Exempt?

Exemptions relate to individuals – Not to job descriptions, pay classifications, positions, job groups, conventional wisdom, etc.

Detailed, accurate, current job information is essential

Must be based upon actual work, real facts

Opponents will dig-into what the employees actually do

Job descriptions alone do not "make employees exempt"

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Course of Action

• Right now, you should:• Analyze whether the requirements for the “white collar” exemptions

you have been relying upon are met;• Evaluate what might be changed about one or more jobs so that the

incumbents may be treated as exempt in the future;• Consider the possible application of alternative FLSA exemptions;

and• Develop FLSA-compliant pay plans for employees who have been

treated as exempt but who will no longer.

www.laborlawyers.com

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What Are My Options?

Raise salaries to maintain exemptionConvert to non-exempt, pay hourly and pay overtime after 40 hours

Pay salary with overtime after 40 hoursReorganize workloads, adjust schedules or spread work hours

Hire additional/part-time employees

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Can I . . .

• Set a salary that includes some overtime “built in?”• Technically – yes• Practically – high risk of noncompliance

• Prohibit/Limit overtime?• Yes• Must pay OT even if not authorized

• Treat some employees in same job as exempt and others as non-exempt?

• Yes• Beware of wage disparity

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Timekeeping

• FLSA requires employer to keep records of how many hours overtime-eligible employees work

• Employers may use any method they choose for recording hours• But MUST be

• Accurate• Complete

• Employer may use their own system or require employee to keep track

• “Punch in/punch out” times are not required

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Accurate Timekeeping

If non-exempt, must keep accurate records of worktime:

Know everything that counts

Have a system and policies for capturing the time accurately

Train employees to follow

Train supervisors/managers to enforce

Periodically see whether the time records appear to be accurate

BEWARE OF “OFF THE CLOCK” work

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Final Questions

Presented by:

George A. Reeves IIIE-mail: greeves@fisherphillips.com

Phone: (803) 255-0000