Preparing for Change: DOL’s Final Rule on Overtime · • July 6, 2015, Wage & Hour Administrator...
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Preparing for Change: DOL’s Final Rule on Overtime Neil Alexander
Transcript of Preparing for Change: DOL’s Final Rule on Overtime · • July 6, 2015, Wage & Hour Administrator...
Preparing for Change: DOL’s Final Rule on Overtime
Neil Alexander
Agenda
• AQuickReview• DOL’sFinalRule• PathtoStop/Modify
• PreparingforChange
AQUICKREVIEW
PreparingforChange:DOL’sFinalRuleonOverSme
TheFairLaborStandardsAct• Requiresemployerstopayemployeesatleastthe
minimumwageandoverSmepayforworkover40hoursinaweek
• Sinceenactedin1938,theFLSAhasincludedexempSonsfromtheminimumwageandoverSmerequirementsforexecuSve,administraSve,professionalandoutsidesalesemployees
• “assuchtermsaredefinedanddelimitedfromSmetoSmebyregulaSonsoftheSecretarysubjecttotheprovisionsof[theAdministraSveProcedureAct]”
29C.F.R.Part541• DOLhasdefinedthe“whitecollar”(or“EAP”)exempSonsinregulaSonsat29C.F.R.Part541
• ExecuSve• AdministraSve• LearnedProfessional• CreaSveProfessional• Computer• OutsideSales
ThreeTestsforExempSon
• SalaryLevel• SalaryBasis
– Exemptemployeesmustbepaidtheirfullsalaryforanyweekinwhichtheyperformanywork
– Salarylevelandbasistestsdonotapplytolawyers,doctors,teachersoroutsidesales
– Computeremployeescanbepaidbythehour($27.63)
• DuSes
TheRulemakingProcess• March2014,Memorandum:PresidentObamadirectsSecretaryofLaborPerezto
revisetheoverSmeregulaSons• Summer2014,SecretaryPerezheld“listeningsessions”withstakeholders• July6,2015,Wage&HourAdministratorWeilissuestheNPRM,proposing
changestothePart541regulaSons.• September4,2015,thecommentperiodclosedaiernearly300,000comments
werefiled,aDOLrecord• March14,2016,DOLsendsFinalRuletoWhiteHouseOfficeofManagement&
Budgetforreview• May18,2016,DOLpublishestheFinalRule
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TheProposedRule• SalaryLevel
– SettheminimumsalaryrequiredforexempSonatthe40thpercenSleofweeklyearningsforfull-Smesalariedemployees–$970perweek($50,440annualized)
– AllownondiscreSonarybonusespaidmonthlyormorefrequentlytosaSsfyupto10%oftheminimumsalarylevel
– AutomaScallyincreasetheminimumsalarylevelsannuallybasedeitheronthe40thpercenSleorinflaSon(CPI-U).
• DuSesTests– LimiSngtheamountofSmeexemptemployeescanspendperformingnon-exemptwork– AdoptCaliforniaprimaryduty50%rule
PublicComments• Someemployersacknowledgedthatanincreaseinsalarylevelisdue,butmostsaid$50,000
istoohigh– Someemployerssuggesteda3to5yearphase-inperiod
• EmployerssupportedcounSngbonusestowardssalarylevel,butalsostated:– Commissionsshouldalsocount– Bonusespaidquarterlyorannuallyshouldalsocount– Shouldnotbelimitedtojust10%
• NearuniversalopposiSontoannualincreases– SomecommenterssuggestedanalternaSveofautomaScincreasesevery5years
• EmployersobjectedtoanychangesintheduSestestsbecauseofDOL’sfailuretoprovidesufficientnoSce
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DOLFINALRULE
PreparingforChange:DOL’sFinalRuleonOverSme
WhatisNOTChanging
• Nochangestothesalarybasistest• Nochangesthatimpactoutsidesales,teachers,lawyersordoctors
• NochangestotheduSestests– NochangesinthedefiniSonofprimaryduty– NochangestotheconcurrentduSesprovision
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MinimumSalaryLevel$913perweek($47,476annualized)• Upfromthecurrent$455perweek($23,660annualized)
• DownfromDOL’sproposed$50,440• Setatthe40thpercenSleoffull-Smenon-hourlypaidemployeesisthelowestwageCensusregion(South)
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BonusesandCommissionsNondiscreSonarybonuses,incenSvepaymentsandcommissions,paidatleastquarterly,cansaSsfyupto10percentoftheminimumsalaryrequirement
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HowWillThisWork?
• Eachworkweek,theemployermustpaytheexemptemployeeasalaryofatleast90%oftheminimumsalarylevel–$821.70($42,728.40annualized)
• Attheendofthequarter,ifthatsalaryplusallbonuses/commissionspaidduringthequarterdonotequal$11,869($47,476÷4),tomaintaintheexempSon,theemployerhastomakeuptheshorsallinthefirstpayperiodofthenextquarter.
• Ques%on:Whatifanemployeeleavesinthemiddleofaquarter?
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HighlyCompensatedEmployees
$134,004totalannualcompensaSon• Upfromthecurrent$100,000• UpfromDOL’sproposed$122,000• Setatthe90thpercenSleoffull-Smenon-hourlypaidemployeesnaSonwide
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AutomaScSalaryLevelIncreases• ThesalarylevelswillautomaScallyincrease
every3years,beginningJanuary1,2020
• DOLwillprovidenoSceofthenewsalarylevels“notlessthan150daysbeforetheJanuary1steffecSvedate”intheFederalRegisterandatwww.dol.gov/whd
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EffecSveDate
• December1,2016– TypicalDOL:yes,thatisonaThursday!
• Butremember,somestatesrequireadvancenoScetoemployeesofchangesinpay– InsomestatesonlyappliestoreducSonsinpay– Mostcommonisonepayperiod– Longestis30daysinMissouriforreducSonsin
pay
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WhatAboutStateLaw?• 18StateshaveduSes
requirementsthatdifferfromthefederalregulaSons
• 4stateshaveaminimumsalarylevelhigherthanthecurrent$455– Alaska– California– ConnecScut– NewYork
• EmployeesmustbepaidoverSmeunlessexemptunderboththefederalFLSAandStateLaw– ThehigherFLSAsalarylevel,and– ThemoredifficultStateduSestests
ISTHEREAPATHTOSTOPORMODIFYTHEFINALRULE?
PreparingforChange:DOL’sFinalRuleonOverSme
• ProtecSngWorkplaceAdvancementandOpportunityAct– IntroducedMarch17,2016bySenateandHouseRepublicans;evenifpassed,unlikelytowithstand
PresidentObama’sveto
– Nullifyproposedorfinalrule
– ProhibitautomaScsalaryincreasesandchangestoduSestestwithoutfurthernoSceandcomment
• CongressionalReviewAct– RequiresjointresoluSonofCongresswithin60legislaSvedaysofpublicaSonoftheFinalRule
– CRAwillnotbeavailableforregulaSonspublishedbyMay16
– PresidentObamawouldveto
LegislaSon?
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• LiSgaSonChallenge– ThereareargumentsthatDOLdoesnothaveauthorityfortheautomaSc
salaryincreasesandtheveryhighsalarylevel
• NewNoSceofProposedRuleMaking– AnincomingRepublicanadministraSoncouldrestarttheregulatoryprocess– MostlikelyalsowouldbelimitedtoautomaScsalaryincreasesandchanges
totheduSestest– Difficulttowalkbackfromthesalarylevelincrease
LiSgaSonorRegulaSon?
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PREPARINGFORCHANGE
PreparingforChange:DOL’sFinalRuleonOverSme
PreparingforChange
• Bo7omline:Thenewrulesarenotgoingtogoaway
• DeterminingwhotoreclassifyandimplemenSngreclassificaSoncantakeuptosixmonths
• December1stwillbeherebeforeyouknowit• Don’twait!StartNOW!
Compliance,Step-By-Step
1. IdenSfyemployeeswhoneedasalaryincreaseortobereclassified
2. DevelopnewcompensaSonplanforthereclassifiedemployees
3. Reviewwage-hourpoliciesandprocesses4. Communicatethechanges5. Trainthereclassifiedemployeesandtheir
managers
SalaryIncreaseorOverSme?• PullsalaryandincenSvepaydataforallemployeesearningbelow$47,476
annualsalary– Or,below$42,728.40annualsalarywithatleast$4,747.60inbonusesand
commissions• Calculatethecostofincreasingsalaryto$47,476
– Considera“re-mix”–loweringincenSvepaytooffsetsalaryincrease• CalculatethecostofoverSme
– Howmanyhoursareexemptemployeesareworking?– (Weeklysalary/40)*1.5*expectedoverSmehours
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Cost-NeutralSoluSonWeeklySalary/(40+(OTHoursx1.5))
• WithagoodesSmateofexpectedweeklyworkhours,applyingthisformulawillprovideanhourlyratewhichwillresultinthesameweeklyandannualcompensaSon
• Yes,itslegal–DOLgaveusthisformulainthepreambletothe2003NoSceofProposedRulemaking(68F.R.15576)
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ComplianceHRHasanAppforThat!AnswerafewquesSonsregardingsalary,bonusesandhoursworked.
Andwithoneclick,compare:• Thecostofasalary
increase• Thecostofpaying
overSme• Thecost-neutralhourly
rate
JobDutyReview• Evenifsalarylevelisnotanissue,youmayhaveemployeeswhodonotmeettheduSesrequirementsforexempSonunderthecurrentregulaSons
• RareopportunitytocorrectclassificaSonissueswithreducedriskoftriggeringliSgaSon
• Withotheremployeesbeingreclassifiedbecauseofthesalaryissue,reclassificaSonsbecauseofjobduSesshouldflyundertheradar
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JobReviewProcess
• Conductunderthea7orney-clientprivilege• ReviewHRISData–salaries,bonuses,direct
reports,educaSonaldegrees• ReviewDocuments–jobdescripSons,training
materials,performanceexpectaSons• InterviewSMEmanagers• LegalanalysistodetermineifjobduSesqualifyfor
anexempSon
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ComplianceHRHasAnAppForThatToo:NavigatorOT
• Afirst-of-its-kindonlineandintelligentsoluSondeliveringexpertlevelriskassessmentsonoverSmeexempSonsatinternetscaleandspeed
• Resultsaierspending10to15minutescompleSnganon-linequesSonnaireaboutjobduSes
• Visitcompliancehr.comformoreinformaSon
AiertheReclassificaSonDecision
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CompensaSonPlanRedesign
• ShouldweconSnuetopayreclassifiedemployeesonasalaryorconvertthemtoahourlyrate?
• ShouldweadjustthesalaryleveldownwardoradoptanhourlyratethatwillminimizeaddiSonalcosts?
• HowwillwecalculateoverSmeforsalariednon-exemptemployees?– Dividesalaryby40– Dividesalarybyactualhoursworked– FluctuaSngworkweek
• WillweconSnuetoprovideincenSvecompensaSon?• Doweneedtomakechangestoanybenefits?
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ReviewPoliciesandProcesses• Policies
– Off-the-clockwork– Mealandrestbreak– TravelSme– Mobiledevice
• Processes– Timekeeping– Payrollchanges– ControllingoverSmehours
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CommunicatetheChanges• Needtocommunicatewithseniormanagement,managersofreclassifiedemployeesandtheemployeesthemselves
• Keydecisions– Whowillcommunicatethechanges?– Whatwillbecommunicated?– Howwillchangesbecommunicated?– Whenwillthechangesbecommunicated
• PreparetalkingpointsandFAQs
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Training• Trainthereclassifiedemployeesandtheirmanagers– Wage&hourpolicies– Timekeepingprocedures– AcSviSesthatarecompensablework
Preparing for Change: DOL’s Final Rule on
Overtime
Neil Alexander Phoenix, AZ
[email protected] (602) 474-3612
