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The U.S. Department of Labor’s Budget‐Busting New Overtime RuleDiane Juffras
Professor of Public Law and Government, School of GovernmentThursday, October 13, 2016
Image Source: http://tinyurl.com/ngqaxux
The Basic Overtime Rule: What is It?
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A Brief History of the FLSA
1938
Passage of the Act
DOL issues its first set of regulations defining exempt categories
Executive Duties Test
Management as primary duty
Supervision of two or more employees
Hiring, firing or promotion authority or hiring,
firing or promotion recommendations given
particular weight.
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Administrative Exemption
1. Primary duty is performance of office or
nonmanual work directly related to management
or general business operations of the employer
2. Performance of such work includes the exercise of
discretion and independent judgment on matters
of significance
The Professional Exemption
Three Separate Tests:
Learned Professional
Creative or Artistic Professional
Computer Professional
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Exceptions to the Salary Rules
• Lawyers
• Teachers
•Doctors
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A Brief History of the Salary Threshold
1940 DOL raises the salary threshold
Weekly Salary Levels for Exemption‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐
Executive Administrative Professional Short test‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐
1938 $30 $30 None N/A1940 30 50 50 N/A1949 55 75 75 1001958 80 95 95 1251963 100 100 115 1501970 125 125 140 2001975 155 155 170 2502004 455 455 455 N/A ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐
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Current Overtime Rule: What is It?
Current Requirements for Exemption from Overtime:
– the position’s duties must satisfy either the executive, administrative or professional duties test;
– the position must be paid on a salary basis; and
– the position must be paid a minimum of $455 per week ($23,660 annually).
The New Overtime Rule: What is It?
New Requirements for Exemption from Overtime:
the position’s duties must satisfy the executive, administrative or professional duties test;
the position must be paid on a salary basis; and
the position must be paid a minimum of $913 per week ($47,476 annually).
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The Making of the New Rule
Presidential Memorandum issued on March 13, 2014
Proposed new overtime rule published on July 6, 2015
Comment period ended on September 4, 2015
Comments requested on specific change to salary threshold
Comments also requested on a number of open‐ended topics
The Proposed Changes: What Were They?
Increase in the minimum salary threshold from $23,660/year to $50,440/year
Possible requirement that any exempt position spend a minimum percentage of time on exempt duties
Possible upper limit on the amount of time any exempt position may spend on nonexempt duties
Prohibition on concurrent performance of exempt and nonexempt duties
Return to the long and short duties tests?
Changes to the duties tests themselves?
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The Actual Changes: What Are They?
Increase in the minimum salary threshold
from $455/week to $913/week
– In annualized terms, that’s an increase from $23,660 to $47,476
$913 Per Week
$913 Per Week
Week in, week out, every week.
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THE SALARY THRESHOLD TEST: MEANT TO BE A
“BRIGHT LINE RULE”
Current v. New Salary Threshold
Current
$455/week or $23,660/year
Below the current poverty level for a family of four
Currently at 12th percentile of F/T salaried workers
1975: $250/week or $13,000/year threshold was at the 65th percentile of F/T salaried workers.
New
$913/week or $47,476/year
40th percentile of F/T salaried workers
Automatic updating of salary threshold every three years beginning January 1, 2020
– Estimate of $984 ($51,168) for 2020
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Current v. New Salary Threshold
Current
Highly Compensated Employee Threshold of $100,000
New
Highly Compensated Employee Threshold increases to $134,004
‐‐ Estimate of $147,524 for
HCE in 2020
Current v. New Salary Threshold
Current
Computer Professional may be salaried or may be paid $27.63/hour
New
No change to minimum hourly rate for Computer Professional
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Current v. New Salary Threshold
Current
Nondiscretionary bonuses not included in calculation of minimum salary threshold
New
Nondiscretionary bonuses may be included in calculation of up to 10% of minimum salary threshold
Rejected Changes to the Duties Tests
A. General changes
B. Single standard duties test v. long and short duties tests
Long test
– $155/week for executive and administrative exemption
– $170/week for professional exemption
– 20% limitation on nonexempt duties
Short test
– $250/week for all exemption categories
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Rejected Changes to the Duties Tests
Minimum percentage of time requirement
Upper limit on time spent on nonexempt duties
Prohibition on concurrent performance
No Changes Either Proposed or Adopted
Comp time
207(k) exemption
Fluctuating workweek
Rules governing on‐call time, training time, travel time
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Remember
Minimum salary for all exempt status positions will be $47,476 per year. NO EXCEPTIONS!
Positions that make less than that minimum CANNOT be exempt, regardless of duties.
Positions that were exempt but become nonexempt because of salary must be compensated for working overtime.
Some Positions Likely to Be Affected
SHRA Salary Grades 50 – 68
Professional Nurse $39,152 ‐‐ $81,960
Planner $38,519 ‐‐ $73,719
Public Communication Specialist $29,743 ‐‐ $77,204
Social Work Supervisor $38,545 ‐‐ $77,102
Financial Analyst $38,519 ‐‐ $106,176
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Some Positions Likely to Be Affected
Public Utilities Complaint Analyst Supervisor: Grade 68
–$36,761/47,384/58,006
Detention Director: Salary Grade 72
–$42,667/55,922/69,177
Departmental Purchasing Agent III: Grade 73
–$44,347/58,346/72,346
Things That You Should Do Now
Make sure your clients know that a significant and
significantly expensive change on FLSA exempt status
will be effective 12/1/16.
Make sure your client is factoring this change into its
FY 2016 budget.
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Steps Your Clients Need to Take Before December 1
Make sure they have current, accurate job
descriptions, at least for positions currently
classified as exempt. If not, get them.
Look at all currently exempt positions to
determine that the duties (regardless of salary)
meet current exempt designations.
Steps Your Clients Need to Take Before December 1
They should look at all currently
exempt positions and see which ones
fall below $913/week and $47,476.
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Steps Before December 1
Managers should survey currently exempt
employees to determine how many hours per
week on average they work.
– Individual weekly totals, not an aggregate.
Match up the individuals in danger of becoming
non‐exempt b/c of salary with their current
average workweek.
– What are potential overtime levels?
– Are changes in job duties possible?
Steps Before December 1
Determine which employee salaries can/should be
raised to retain exempt status and which cannot.
Determine what it would cost if exempt employees
who are below new salary minimum had their
current salary converted to an hourly figure and
continued to work the same number of hours.
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Steps Before December 1
Consider consequences from lowering the hourly
rate of currently exempt employees (who will
become non‐exempt) so that with their average O/T
they will make same total earnings.
Consider if judicious use of fluctuating workweek
might alleviate some issues with overtime pay for
newly non‐exempt employees.
Steps Before December 1
Assess whether your organization will want to use cash overtime or compensatory
time‐off for O/T compensation.
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Things an Employer Can Do
Raise salaries
Things an Employer Can Do
Convert salaries
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Things an Employer Must Decide:
Exempt and non‐exempt employees in same classification?
– Loss of status issues
– Division of labor / extra compensation
Things an Employer Must Decide:
Whose pay to increase to keep exempt status?
– “Why her and not me?”
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Things an Employer Must Decide:
Changes in telecommuting policy/status
– “Why am I losing my flexibility? That’s why I took this stinking job!”
Things an Employer Should Do
Decide on time‐keeping measures for newly nonexempt employees
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Timekeeping for the Newly Nonexempt
Were they required to keep track of their time when they were exempt?
Basic timekeeping for nonexempt employees:
Beginning of the work day or shift
End of the work day or shift
Uncompensated meal breaks
Uncompensated rest periods (rest periods of longer duration than 20 minutes).
Timekeeping for the Newly Nonexempt
How do you currently handle e‐mails and phone calls taken at home by nonexempt employees?
How do you handle other kinds of remote work?
Will you be able to get the Newly Nonexempt to record that time?
Will you need special e‐mail and phone call logs for the Newly Nonexempt?
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The challenge of explaining the concept of compensable time.
Timekeeping for the Newly Nonexempt
Weekly Queries
1. Did you take or make any phone calls after hours or from home this week?
2. Did you respond to any e‐mails on your phone while “out on the town” this week?
3. Did you respond to any e‐mails from home this week?
4. Did you work on any reports or other documents after hours or from home this week?
5. Did you take an uninterrupted 30‐minute lunch break?
6. Were you on‐call this week?If so, did you respond to any calls?
7. Did you participate in or travel to any educational programs or training?
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Things an Employer Should Do
Implement overtime controls
Unauthorized Overtime
If the Newly Nonexempt are supervisors or
department heads, from whom will you require
them to get permission to work overtime?
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Unauthorized Overtime
What will you do to enforce compliance with
overtime policies?
Things an Employer Should Do
Train the newly nonexempt and their supervisors
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Things an Employer Should Do
Train them some more
Training and Providing Information
Essential training for supervisors and managers:
• compensable time
• how to control overtime
• record‐keeping for non‐exempt employees
• information provided to employees
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Training and Providing Information
Essential information for employees:
• why this is occurring
• the difference between exempt/non‐exempt
• organization’s policy on overtime work
Questions and Answers
What’s the difference between exempt and
non‐exempt status?
Be prepared to explain the concepts of work week,
overtime, and overtime compensation (either pay
or paid time off, depending on your organization.)
Be prepared to talk about the difference in record‐
keeping between the statuses.
Be prepared to talk about any benefits differences.
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Down the Road
Who will monitor salaries to insure that exempt status is maintained when salary floor automatically rises?
Will your organization revisit pay increases to regain exempt status?
Will there be periodic “refreshers” on exempt/non‐exempt status, overtime work and compensation and relevant organizational policy?
Things That Have Not Changed
The requirement that a position satisfy a duties test, be paid on a salary basis and earn the minimum salary threshold in order to be exempt.
Duties tests
Nonexempt employees still owed overtime after 40 hours worked in a workweek.
Government employers may still use comp time: 1 ½ hours of paid time off in lieu of cash overtime.
207(k) exemption for LEOs and firefighters
Fluctuating workweek
All those tricky rules governing compensable time
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Things That Have Changed
Minimum salary required for position to be exempt from overtime:
– $913 per week or $47,476 per year
– $134,004 for HCEs
Inclusion of nondiscretionary bonuses such as longevity pay in meeting up to 10% of salary threshold
Automatic updating
Questions?
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