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COUNTDOWN TO OVERTIMEAre You Ready?

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© 2 0 1 6 C o m p l i a n c e H R . A l l R i g h t s R e s e r v e d .

FEATURED SPEAKER

Tammy McCutchen• P r i n c i p a l , L i t t l e r M e n d e l s o n

• V P S t r a t e g y , C o m p l i a n c e H R

• F o r m e r A d m i n i s t r a t o r , U S - D O L , W a g e & H o u r D i v i s i o n

A u t h o r , 2 0 0 4 R e v i s i o n s t o W h i t e C o l l a r E x e m p t i o n s

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PROPOSED CHANGES

Working on Overtime: Preparing for DOL's Changes to the FLSA Overtime Regulations

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PROPOSED CHANGES - SALARY

Increase minimum salary level to $50,440

Automatic annual increases to the salary level

Allow some bonuses to count towards the minimum salary

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PROPOSED CHANGES – DUTIES

Redefine “primary duty” – CA 50% ruleEliminate/modify the “concurrent duties” ruleReturn to pre-2004 long/short duties tests, with long test 20% restriction on non-exempt work

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PREPARING FOR CHANGE

Working on Overtime: Preparing for DOL's Changes to the FLSA Overtime Regulations

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WHEN?

March 14, 2016, DOL sends Final Rule to White House Office of Management & Budget• OMB review generally takes 30 to 90 days• In this rulemaking, OMB’s review of the proposed

regulations took 60 days• Thus, most likely, the Final Rule will be published

around May 16, 2016

DOL must provide at least a 60-day effective date, but do not expect more – be prepared to comply with the new regulations by July 15

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WHAT?

Salary Level• Although DOL may moderate down a bit, also unlikely to increase

salary level above $50,440• Likely to implement automatic annual increases• Unlikely to allow bonuses to count towards the minimum salary level

Duties Tests• Likely to restrict the amount of non-exempt work that an exempt

employee can perform• May move towards the California 50% primary duty rule

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HOW?

1. Identify employees who need to be reclassified

2. Develop new compensation plan for the reclassified employees

3. Review wage-hour policies and processes

4. Communicate the changes

5. Train the reclassified employees and their managers

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Jobs paid below $55,000 - $60,000 annual salaryJobs with large numbers of incumbent employeesClass action favorites

• Assistant managers• Accounting (non-CPAs)• Sales and sales support• Help desk functions and other computer employees

without programming duties• Customer service

IDENTIFY JOBS FOR REVIEW

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SALARY INCREASE OR OVERTIME?

Pull salary and incentive pay data

Calculate the cost of increasing salary to $50,440• Consider lowering incentive pay to offset salary

increase

Calculate the cost of overtime• How many hours are exempt employees working?• (Weekly salary / 40) * 1.5 * expected overtime

hours

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COST-NEUTRAL SOLUTION

Weekly Salary / (40 + (OT Hours x 1.5))With a good estimate of expected weekly work hours, applying this formula will provide an hourly rate which will result in the same weekly and annual compensationYes, its legal – DOL gave us this formula in the preamble to the 2003 Notice of Proposed Rulemaking (68 F.R. 15576)

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EXAMPLE

Assistant Manager Ann Stanley earns an annual salary of $35,000 and works 50 hours per week for 50 weeks in a year

Cost of salary increase• $50,440 - $35,000 = $15,440

Cost of overtime• $35,000/52 = $673.08

• $673.08/40 = $16.83

• $16.83 x 1.5 x 10 hours = $252.40 x 50 weeks = $12,620.19

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EXAMPLE

Assistant Manager Ann Stanley earns an annual salary of $35,000 and works 50 hours per week for 50 weeks in a year

Cost of salary increase, $15,440Cost of overtime, $12,620.19Cost neutral solution• $35,000/52 = $673.08

• $673.08/40 + (10 hours x 1.5)

• $673.08/55 = $12.24

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Compl ianceHR HAS AN APP FOR THAT

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JOB DUTY REVIEW

Do you have employees who do not meet the duties requirements for exemption?

Rare opportunity to correct classification issues with reduced risk of triggering litigation

Traditional exemption review process:• Document Review• Manager Interviews• Legal Research• Legal Opinions

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Compl ianceHR HAS AN APP FOR THAT

A first-of-its-kind online and intelligent solution delivering expert level risk assessments on overtime exemptions at internet scale and speed

Results after spending 10 to 15 minutes completing an on-line questionnaire about job duties

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WELCOME TO COMPLIANCEHR

The award-winning joint venture that combines the subject matter expertise of Littler with the revolutionary software of Neota Logic.

The result? The first of its kind suite of intelligent applications delivering guidance at Internet speed and scale.  

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A F T E R T H E R E C L A S S I F I C AT I O N D E C I S I O N

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COMPENSATION PLAN REDESIGN

Should we continue to pay reclassified employees on a salary or convert them to a hourly rate?

Should we adjust the salary level downward or adopt an hourly rate that will minimize additional costs?

How will we calculate overtime for salaried non-exempt employees?• Divide salary by 40• Divide salary by actual hours worked• Fluctuating workweek

Will we continue to provide incentive compensation?

Do we need to make changes to any benefits?

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REVIEW POLICIES AND PROCESSES

Processes• Timekeeping • Payroll changes• Controlling overtime hours

Policies• Off-the-clock work• Meal and rest break• Travel time• Mobile device

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Need to communicate with senior management, managers of reclassified employees and the employees themselves

Key decisions• Who will communicate the changes?• What will be communicated?• How will changes be communicated?• When will the changes be communicated

Prepare talking points and FAQs

COMMUNICATE THE CHANGES

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TRAINING

Train the reclassified employees and their managers

• Wage & hour policies• Timekeeping procedures• Activities that are

compensable work

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TAMMY’S GOLDEN RULE

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Q U E S T I O N S ?

© 2 0 1 6 C o m p l i a n c e H R . A l l R i g h t s R e s e r v e d .

L o r i B r o w nbrown@compliancehr.com

305.213.5419

Ta m m y M c C u t c h e nmccutchen@compliancehr.com

202.414.6857