PROPOSED NEW FEDERAL OVERTIME REGULATIONS AND WHAT … · PROPOSED NEW FEDERAL OVERTIME REGULATIONS...

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PRSA Counselors Academy Webinar

PROPOSED NEW FEDERAL OVERTIME REGULATIONS AND WHAT THEY MEAN FOR YOUR FIRM

Thursday, March 17, 2016

Michael C. Lasky

Partner/Co-Chair Public Relations Law 212.468.4849 [email protected] © 2016 Davis & Gilbert LLP

Jessica Golden Cortes

Partner Labor & Employment 212.468.4808 [email protected]

WHY IS THIS WEBINAR

IMPORTANT TO YOU?

The Proposed New Federal Overtime Regulations

and What They Mean for Your Firm

2

PREPARING FOR THE CHANGES:

BEST PRACTICES

Projected release date for Final Rule

By July 2016 if not late Spring, with

implementation by the end of 2016



3


BEST PRACTICES

Begin preparing NOW – Employers may

have as little as 30 to 60 days to comply

before new regulations go into effect

FEDERAL OVERTIME

REGULATIONS



5

CURRENT LAW

»To qualify for “white collar” exemption (executive,

administrative and professional employees)

- Predetermined and fixed salary not subject to

reduction due to variations in quality/quantity of

work performed (salary basis test)

- At least $455/week or $23,660 annually (salary

level test)

- Employee primarily performs executive,

administrative or professional duties (duties

test)



6

CURRENT LAW

»To qualify for highly-compensated employee (HCE)

exemption

- Total annual compensation of at least $100,000

- At least $455/week on a salary or fee basis

- Perform office or non-manual work

- Regularly perform at least one of the exempt

duties of an executive, administrative, or

professional employee



7

SUMMARY OF PROPOSED CHANGES

»Issued on July 6, 2015

»“White collar” exemption

- Salary level increased to $970/week, or

$50,400 annually

- Will automatically increase based on percentiles

of earnings for full-time salaried workers or

changes in inflation with the purposes of

remaining at 40th percentile nationwide of

weekly earnings for full-time salaried workers



8


- NO specific change to duties test disclosed

• However, DOL requested comment on

whether the duties test appropriately

distinguishes between exempt and

non-exempt employees

- NO change to tests for outside sales

employees, teachers, lawyers and doctors



9


»Highly-Compensated Employee exemption

- Total annual compensation estimated to be at

least $122,148 (including commissions and

non-discretionary bonuses/compensation)

- Will automatically increase annually based on

percentiles of earnings for full-time salaried

workers or changes in inflation

• Meant to reflect the 90th percentile of full-time

salaried workers



10


»DOL requested and received comments on

- Whether incentive compensation and

non-discretionary bonuses should be considered

to satisfy salary level test

- Whether commissions should be included as part

of incentive compensation and non-discretionary

bonuses to satisfy salary level test



11


- Modification to duties test

• E.g., Should employees be required to spend a

minimum amount of time performing exempt

duties to qualify for exemption?

- Mechanism for updating salary level

• Fixed percentile of earnings of full-time

salaried workers vs. inflation



12

POTENTIAL IMPACT

OF NEW REGULATIONS

Overtime is poised to become an even bigger issue for employers…



13

POTENTIAL IMPACT

OF NEW REGULATIONS

»Approximately 5 million employees may no longer

qualify as exempt

»Employers in states with wage-and-hour laws that

are more restrictive than FLSA will need to

determine how the new regulations affect

employee classifications in those states



14

IMPACT ON PR INDUSTRY

» PRWeek March 2016 Salary Survey (http://www.prweek.com/us/salarysurvey)

- Nationwide median salary by title

• Account Executives (AE) - $48,800

• Assistant Account Executives (AAE) - $40,750

• Account Coordinators (AC) - $37,500



15


»The Official Public Relations Salary & Bonus

Report 2015 Edition (based on 2014 comp) (http://www.springassociates.com/salary-bonus-report.html)

- Data break down by

• 8 key metro areas, e.g., New York, Atlanta,

Chicago, Los Angeles, Boston, Houston,

Washington, D.C., San Francisco

• Area of PR specialty, e.g., consumer,

corporate/financial, health/med/pharma, tech,

public/gov’t affairs, social media



16


»The Official Public Relations Salary & Bonus Report

2015 Edition

- Most junior position reviewed is Account

Executive (AE) /Account Associate (AA)

- Potential for different classifications for AE/AAs

based on region

- E.g., AE/AA concentrating in Health/Med/Pharma

- New York: Range $55,000 - $68,000

- Atlanta: Range $48,000 - $58,000

- Washington, D.C.: Range $40,000 - $55,000



17


»The Official Public Relations Salary & Bonus Report

2015 Edition

- Senior Account Executive (SAE)/Senior Account

Associate (SAA) compensation should also be

reviewed

- Data reflects that in the Southeast, Midwest and

Southwest companies are paying SAEs/SAAs a

salary range of $45,000 - $60,000



18

NEW YORK AND CALIFORNIA

»New York already requires at least $675/week

($35,100 annually) to executives and

administrative professionals

»California already requires at least $800/week

($41,600 annually)



19


BEST PRACTICES

»Analyze your workforce to determine which

employees will be affected

- Track employee hours to assess options for

compensation under the new regulations



20


BEST PRACTICES

»Consider whether to

- Increase salary and bolster qualifying job duties

to maintain exemption (one-time fix may not be

enough)

- Reduce salary to balance anticipated overtime

payments (consider impact on morale)

- Maintain salary and reassign certain duties to

an existing or new employee to ensure that the

affected employee does not work more than

40 hours/week



21


BEST PRACTICES

- Convert the affected employee to non-exempt,

and pay overtime when incurred

• Note: Hourly rate may be modified to match

employee’s current compensation level

- Remember to disseminate new WTPA forms in

NY and CA



22


BEST PRACTICES

»Consider impact on flexible working arrangements

and/or limiting remote connectivity for affected

employees

»Revise job descriptions to minimize non-exempt

duties for EAP and HCE employees – and make

sure descriptions are followed in practice

»Consider adjusting workweek periods for certain

groups of employees

- E.g., Thursday to Wednesday instead of

Monday to Sunday



23


BEST PRACTICES

»Review, and if necessary, revise policies

addressing overtime, proper time reporting, off-

the-clock work and acceptable use of work-related

devices, so that they are ready to distribute to

affected employees when new regulations go into

effect

»Consider feasibility of adopting fluctuating

workweek pay method



24


CONSIDER THE FLUCTUATING

WORKWEEK METHOD

»Permits employers to pay non-exempt employees

a fixed salary – even if the employee’s hours

fluctuate from week to week

»Overtime then paid at an additional one-half the

regular rate of pay

»May allow employers to continue paying affected

employees on a salary basis and also minimize

overtime costs



25



WORKWEEK METHOD

» Requirements

- Hours must fluctuate from week to week

- Fixed salary that does not vary with number of

hours worked during the week (excluding

overtime premiums)

- Fixed salary results in regular rate that is equal

to or more than minimum wage

- Clear mutual understanding between employer

and employee that fixed salary is compensation

for the workweek, regardless of number of

hours worked



26



WORKWEEK METHOD

»Other considerations

- Employers need to track hours for FWWM employees

- Certain states, such as California, prohibit use of

FWWM

- Payment of shift differentials, commissions and

performance bonuses may invalidate FWWM

• NY - Performance bonuses held not to invalidate

FWWM

- Employee morale

- Risk of miscalculation



27

RISK OF OFF-THE-CLOCK CLAIMS:

TRAIN YOUR MANAGERS

»Newly non-exempt employees may be entitled to

overtime pay for “off-the-clock” work (e.g., time

spent answering calls and emails after regular

work hours)

- DOL has turned its attention to off-the-clock use

of electronic devices by non-exempt employees,

particularly with rise of use of portable electronic

devices



28


TRAIN YOUR MANAGERS

»Possible defense – De minimis exception

- Employers do not have to pay for de minimis

(negligible) amounts of work performed outside

of working hours that are infrequent and

insignificant and cannot be practically recorded

for payroll purposes

• E.g., Occasionally answering an email/call, or

monitoring a device



29


TRAIN YOUR MANAGERS

- But if it is the employee’s regular practice to

respond to calls/emails, employer expects

response off-hours, and doing so is part of

employee’s job – exception does not apply

- Test: (1) Practical administrative difficulty of

recording such time; (2) size of the claim in

aggregate; (3) whether work was performed

on regular basis



30


TRAIN YOUR MANAGERS

»Possible defense – Incidental preliminary and

postliminary activities

- Employers not required to pay for activities

which are preliminary or postliminary to

employee’s principal activity and occur before

or after the employee’s usual working hours

• E.g., Downloading/reading emails regarding

next day’s work assignments

- Such activities are compensable if they are an

“integral and indispensable part of the

employee’s principal duties”



31


TRAIN YOUR MANAGERS

»Possible defense – Lack of actual or constructive

knowledge

- To be compensated for off-the-clock work,

employees must show that the employers had

actual or constructive knowledge that they were

performing such work

- Email/phone records may be relevant,

especially if employer regularly reviews such

information for productivity or verification

purposes

Special Issues for Apps Relying on Advertising to Generate Revenue 32 Basics of Advertising and Marketing Law 32 32

QUESTIONS?

Michael C. Lasky

Partner/Co-Chair Public Relations Law 212.468.4849 [email protected] © 2016 Davis & Gilbert LLP

Jessica Golden Cortes

Partner Labor & Employment 212.468.4808 [email protected]

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