Michael B. Glomb, Partner

Feldesman Tucker Leifer Fidell LLP

August 9, 2016

Raising the Overtime Pay Threshold: An

Overview of New Federal Requirements for

Employers

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MICHAEL B. GLOMB

• Partner at Feldesman Tucker Leifer Fidell LLP

specializing in general corporate, income tax

exemption, grants law, and fraud and abuse

matters.

• Teaches Healthcare Corporate Compliance

and Federal Income Tax Exemption in the

Department of Health Policy at The George

Washington University School of Public

Health and Health Services

• Over three decades of experience advising

community-based organizations on a broad

range of employment-related legal matters

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DISCLAIMER

• This training has been prepared by the attorneys of Feldesman Tucker

Leifer Fidell LLP. The opinions expressed in these materials are solely

their views and not necessarily the views of the National Council for

Behavioral Health.

• The materials are being issued with the understanding that the

authors are not engaged in rendering legal or other professional

services. If legal assistance or other expert assistance is required,

the services of a competent professional should be sought.

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AGENDA

• FLSA overtime requirements

– Key terms

• Exemptions

• New definition of “salary basis”

• Coping with the new threshold

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BASIC FLSA REQUIREMENTS

• Pay minimum wage – currently $7.25/hr (FEDERAL)

• Pay 1.5 times the “regular rate of pay” for more than

40 “hours worked” in a “workweek”

• But note that more stringent state/local laws will

prevail over federal requirements

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KEY FLSA TERMS

• Regular rate of pay

– all remuneration for employment, except OT, weekend and holiday

differentials, discretionary bonuses, gifts, etc.

• Workweek

– fixed and regularly recurring period of 168 hours – 7 consecutive

24-hour periods

• Hours worked

– includes all time employee is required to be on the employer’s

premises, on duty, or at a prescribed workplace

– incudes “suffer or permit” time

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EXEMPTIONS FROM FLSA OVERTIME PAY

• Executive

• Administrative

• Professional

• Computer professionals

• Highly compensated employees

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EAP EXEMPTIONS

• Executive, Administrative, Professional (EAP)

Exemptions

– Duties test

– Paid on a salary basis

– Minimum salary requirement THIS IS WHERE THE NEW

RULE APPLIES

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EAP DUTIES TEST

• Executive

– Primary duty of managing the enterprise or a recognized

department or subdivision

– Customarily and regularly directs work of two or more

other full-time employees, or equivalent

– Has authority to hire or fire, or recommendations are

given particular weight

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EAP DUTIES TEST

• Administrative

– Performs office or non-manual work directly related to

the management or general operations of the employer

or employer’s customers

– Primary duty includes the exercise of discretion and

independent judgment with respect to significant

matters

1111

EAP DUTIES TEST

• Learned Professionals

– Primary duty involves performance of duties requiring

• Knowledge of an advanced type, primarily intellectual in

character, consistent exercise of discretion and judgment

• In a field of science or learning

• Acquired through a prolonged course of specialized

intellectual instruction

– e.g. physicians, RNs

• Note: physicians and residents are exempt from the “salary

basis” test

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EAP DUTIES TEST

• Computer Professionals

– Work consists of design, documentation, testing,

creation, or modification of computer systems or

programs

– Involves design, documentation, testing, creation, or

modification of computer programs related to machine

pope rating systems

– Work combines above duties requiring same level of

skills

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EAP DUTIES TEST

• Highly Compensated Employees (HCE)

– Performs non-manual work

– Performs any one or more of the duties required for the

EAP exemptions

– Compensated at least $100,000 per year (current)

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EAP SALARY BASIS

• Salary basis

– Regularly receives a pre-determined amount weekly or

less frequently for all or part of the compensation

– Amount does not vary based on quantity/quality of work

performed

– Paid at a minimum compensation level

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EAP MINIMUM COMPENSATION

• $913 per week/$47,476 annually (beginning December 1,

2016)

– Current amount is $455/$23,660

• $134,004 annually for HCE

– Regular bonuses can count for up to 10%

• Minimum amount will be adjusted every three years – first

adjustment in 2020– Estimated to go to $984/$51,168 and to $147,524 for HCE in 2020

• Potential additional record keeping obligations

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COPING WITH THE NEW

THRESHOLD

• Pay OT (as authorized by employer)

– No “suffer or permit” time

– No averaging over pay period

– Generally, no compensatory time

– No docking for poor performance or partial day

absences

– OT pay is not waivable

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COPING WITH THE NEW THRESHOLD

• Reduce regularly scheduled hours to 40 or fewer

and monitor hours

• Reduce base pay to adjust for OT premium

• Raise pay to above OT threshold, but make sure that

employee otherwise qualifies for exemption

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COPING WITH THE NEW THRESHOLD

• The new rule DOES NOT require converting salaried

employees to hourly

• MAY require modifications to non-payroll employee

benefits

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COPING WITH THE NEW

THRESHOLD

• DO NOT

– Attempt to re-classify workers as independent

contractors without solid grounds

– Wait until the last minute to develop a strategy

2020

SUMMARY

• SUMMARY

– No one “best” way to handle

– May require “employee by employee” decisions

• QUESTIONS?

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CONTACT INFORMATION

Michael B. Glomb

Mglomb@FTLF.com

1129 20th St. NW, Suite 400

Washington, DC 20036

(202) 466-8960

www.FTLF.com