One of the biggest HR topics last year was the Notice of Proposed Rulemaking in regards to the FLSA Overtime Exemption. While the final rule has not been published, and therefore the standards and amounts are not set in stone, the NPRM has slated that the minimum annual salary threshold for executive, administrative, and professional overtime exemptions will in essence double by increasing from $23,660 to $50,440.
The Department of Labor is planning on issuing a final rule during the spring of 2016, and the effective date of the final rule would be 60 to 120 days after publication; but this is just speculation; thus now is the time to make sure you are prepared.
Below is a check list to get you started on making sure you are ready for the proposed changes. Please keep in mind that every business and industry is different, so this is not a comprehensive list, but rather a good starting point.
- Review employees job descriptions. Are they still accurate? Do the actual job duties fall within the exempt status?
- Identify exempt salaried employees with a salary below $50,440 or $970 per week.
- Identify the true hours worked per salaried exempt employee who makes less than $50,440 yearly. Start having salaried employees, which are below the $50,440 threshold, track their actual time worked if they are not already.
- Determine if it is better to raise the employee’s salary to 50,440 based on the average number of hours they are working, or if it is better to classify them as non-exempt from overtime.
- If reclassifying to non-exempt, determine if you will take their current annual salary and divide it by 2080 (40 hours per 52 weeks a year) to achieve what their new hourly rate may be.
- If employees, who will be reclassified as non-exempt, are consistently working over 40 hours per week, consider if overtime will be allowed or if it will be discouraged, and if so how much will be allowed.
- If you will implement a policy discouraging overtime for employees newly classified as Non-exempt, determine if certain tasks and jobs will need to be reassigned to another employee.
- Determine if additional employees need to be hired as a result of job duty changes, rather than possibly incurring additional overtime.
- Take a look at “remote work” for salaried employees. If employees who are currently exempt will be reclassified as non-exempt, now is the time to look at your policies regarding after work hours business phone calls and emails that are being read and/or responded to.
- Prepare a plan of how to explain the classification changes to employees, and what the changes will mean to them and their paychecks.
Summing it up, look at job descriptions, pay rates near the threshold, and especially at hours worked. If you are unsure of just how many hours those exempt employees are working, now is the time to start tracking them.
For further questions regarding the proposed changes, please contact our HR/Client Services Department at 770-339-0000 or ClientServices@hr-startegies.com. If you are in need of a Time & Attendance solution to track your employees hours, Please contact us at 770-339-0000 or TimeTracker@hr-strategies.com
Notice of Proposed Rulemaking for new Overtime Requirements
On March 13th, 2014 the White House’s Office of the Press Secretary released the Fact Sheet: Opportunity for All: Rewarding Hard Work by Strengthening Overtime Protections. As an excerpt from the fact sheet states, “The overtime and minimum wage rules are set in the Fair Labor Standards Act, originally passed by Congress in 1938, and apply broadly to private-sector workers. However, there are some exceptions to these rules, which the Department of Labor has the authority to define through regulation. One of the most commonly used exemptions is for “executive, administrative and professional” employees, the so-called “white collar” exemption.” A Presidential Memorandum was signed in 2014 instructing the Secretary of Labor to update regulations regarding who qualifies for overtime protection.
After more than 15 months of waiting, the 295 page Notice of Proposed Rulemaking (“NPRM”) was released on June 30, 2015. The NPRM is just the proposed regulations and are subject to a 60 day public comment period that will end on September 4th, 2015. This public comment period allows for all to comment with any dissatisfactions or concerns that they may have. The results of this comment period are then to be taken into consideration before the final rule is published. The comment period and subsequent review is expected to take between 6-8 months; thus, a final rule is not expected until 2016. To voice your opinions and concerns you may go to: http://www.regulations.gov/#!docketDetail;D=WHD-2015-0001.
The Proposed Changes
The NPRM as stated is 295 pages long, so here is a brief summary of what you need to know:
- The current salary threshold for the executive, administrative, and professional exemptions is $455 a week ($23,660 a year). The DOL proposes to establish the minimum qualifying weekly salary commensurate with the 40th percentile of weekly earnings for all full-time salaried employees in the United States. This would mean that the minimum weekly salary for the executive, administrative and professional exemptions will increase to $921 per week, or $47,892 annually. However, if the rule is not in effect until 2016, those numbers based on the 40th percentile will be $970 a week, or $50,440 annually.
- The proposed Rule also increases the minimum annual compensation for the highly-compensated employee exemption from $100,000 to $122,148, which is based on the 90th percentile of salaried workers’ weekly earnings.
- For the first time since the Fair Labor Standards Act was passed in 1938, the DOL proposes to automatically increase the minimum weekly salary requirement each year based on data from the Bureau of Labor Statistics. The Department, however, has not chosen between the two different indexing methods that it has studied.
- Keeping the levels chained to the 40th and 90th percentiles of earnings.
- Adjusting the amounts based on changes in inflation by tying them to the Consumer Price Index.
- There had been talk of changing the “duties test” for the executive, administrative, and professional exemptions; however, at this time there is nothing proposed regarding the duties test in the NPRM. Rather the DOL is only seeking public comments on the issue, which means that there may be revisions in the future.
Why the Change?
The last time the rule for the weekly salary that must be paid to an employee in order for the employee to be eligible for the executive, administrative and professional FLSA overtime exemptions were updated was in 2004. The minimum annual salary level for these exempt classifications under the 2004 regulations is $23,660, which is now below the poverty line for a family of four. By changing the exemption qualifications there will be a dramatic increase in the number of salaried employees who are entitled to overtime pay. It is estimated that these proposed changes will qualify approximately 4.6 million more employees nationally for overtime if the proposed rule is adopted.
What Comes Next?
By possibly changing the rules as to who qualifies as exempt vs. non-exempt from overtime, in regards to the income threshold for salary exempt status being raised; many employers are sure to be exposed to further FLSA cases. Now is the time to review your employee’s exemption classifications and to prepare to look into your compensation plans for your exempt employees, especially those who are salaried exempt making less than $970 a week.
We urge you to review the following:
DOL Press Release on the NPRM at http://www.dol.gov/whd/overtime/NPRM2015/
The Wage and Hour Fact Sheet at http://www.dol.gov/whd/overtime/NPRM2015/factsheet.htm
The FAQ’s regarding the Overtime NPRM at http://www.dol.gov/whd/overtime/NPRM2015/faq.htm
As always, HR Strategies is here to answer any questions or concerns that you have regarding the NPRM or other aspects of the FLSA and Wage & Hour. You may contact us at 770-339-0000.
Executive Actions on Immigration could affect not only an estimated 5.2 million unauthorized immigrants living in the United States, but small business owners and entrepreneurs as well.
Here’s a look at the actions listed to streamline legal immigration, according to the White House Fact Sheet on Immigration Accountability Executive Action:
- Providing portable work authorization for high-skilled workers awaiting LPR status and their spouses.
- Enhancing options for foreign entrepreneurs.
- Strengthening and extending on-the-job training for STEM graduates of U.S universities.
- Streamlining the process for foreign workers and their employers, while protecting American workers
- Reducing family separation for those waiting to obtain LPR status.
- Ensuring that individuals with lawful status can travel to their countries of origin.
- Issuing a Presidential Memorandum on visa modernization.
- Creating a White House Task Force on New Americans.
- Promoting Citizenship Public Awareness
- Ensuring U.S. Citizens Can Serve
- Creating a mechanism that requires certain undocumented immigrants to pass a background check to make sure that they start paying their fair share in taxes.
- Expanding DACA to cover additional DREAMers
With this immigration reform 3.7 to 4.1 million unauthorized immigrants who are parents of U.S. citizens and LPR’s (lawful permanent residents) will have the opportunity to request a temporary relief from deportation and work authorization for three years at a time; if they come forward and meet certain qualifications. To meet the qualifications they must register, have been continuously present in the U.S. for more than 5 years, submit to biometric data, pass background checks, show that their child was born before the date of this announcement, and pay taxes. Again, this is only a temporary relief of three years at a time.
The Executive Action also allows for the expansion of the Deferred Action for Childhood Arrivals; eliminating the age cap that had previously limited the law to childhood arrivals who turned 31 prior to 6/15/12. Just as with the parents mentioned above, continuous presence in the US must have begun prior to January 1, 2010; and will also only be granted in increments of 3 years.
So what does all of this mean for the common small business owner from an HR standpoint?
One thing of importance is that thus far the executive order does not allow this new class of worker to get subsidies under the Affordable Care Act. In fact, the president’s executive order at present does not extend to the ACA eligibility in anyway, there for these employees won’t count towards your 50 employee of more threshold quota.
Some theorize that many of these individuals will step forward to claim a legitimate work status; thereby using an Individual Taxpayer Identification Number to contribute to the social security system and pay taxes. However, employers may also see an increase in employment lawsuits or more union organizing, as this new population of workers who have been silent at the worksite begins to speak out in regards to their grievances; ranging from harassment, discrimination, and lack of overtime pay. Be sure that these employees who may not have been given vacation time, and other benefits in the past, will now have the same expectations as the other employees.
However, it is expected that many of the immigrants who could seek relief will not do so, as they realize that this is “temporary” and not legislation. Additionally, while receiving amnesty (even temporarily) may seem enticing, many will choose to forego applying, to avoid paying the application costs, and having to pay taxes.
There are sure to be several new guidance’s issued in the coming weeks from the Department of Labor in coordination with other agencies, such as the United States Immigration and Customs Enforcement, regarding the new executive actions; and as with anything new there are bound to be greater audits and regulatory checks. Businesses may want to entertain the idea of doing their own proactive audit and recheck their employee’s documents, legitimizing the work statuses of employees, even if you think they have passed previously. Remember that any employee who presents new forms of identification should also complete a new I-9 form. Most importantly of all, remember not to take any discriminatory or retaliatory actions against any workers as it relates to the new immigration orders.
From April 1, 2013 to March 31, 2014 a record number (8,126) of FLSA cases have been filed across the country. This represents nearly a 5 percent increase from the year before, and the seventh straight year of increases. In fact, the number of cases filed has risen 438% since the year 2000. Astonishingly enough, these numbers only capture half of the picture as they represent only the federal cases, and not any wage and hour lawsuits filed within the individual state courts. Unfortunately for business owners, the number of cases being filed is expected to continue to rise with the speculation of raising the minimum wage and tightening the regulations on white collar overtime exemptions. HR Strategies can help you reduce your risk and vulnerabilities to a FLSA regulations lawsuit, along with the many other Federal, State, Local and Professional Regulatory changes. Call us today to relieve your stress of whether or not you are in compliance; and give yourself the ability to focus on the aspects of your company for which you went into business, while we handle the behind the scenes issue of compliance. 770-339-0000
It seems as though every year the Federal and State governments are adding more acts, mandates, and laws to the business of employment. As a small to mid-sized business, you probably don’t have the time to keep up with the names of all of the new ones, let alone how they can impact you as an employer. Large corporations have complete in-house HR departments and legal departments that work at not only keeping up with the new regulations, but also keeping their corporations in compliance. Are you that lucky? Often times an employer can feel overwhelmed by the addition of regulations, and a bit apprehensive as if a black cat keeps crossing their path and they are just waiting for the bad luck of fines and work interruption from non-compliance to present itself.
HR Strategies focuses on keeping you compliant by working as your off-site HR department, with the back-up of legal counsel from one of our strategic partners, Jackson Lewis, which is one of the largest law firms specializing in workplace law. HR Strategies team can help you reduce the fear of the black cat of regulatory compliance and your risk and vulnerabilities to Federal, State, Local and Professional Regulatory changes. We keep pace with changing governmental requirements that affect your business and help you stay compliant. By relieving your stress of whether or not the black cat (of regulatory compliance) crossing your path on Halloween, or any time of year, and worrying if you are in compliance, we give you the ability to focus on the aspects of your company for which you went into business, while we handle the behind the scenes issues. Click HERE or on the picture above to learn more about how HR Strategies can help you stay complaint.
On September 25th, 1957 nine African American students known as the “Little Rock Nine” attended their first full day of classes at Central High in Little Rock, Arkansas. Amidst strong opposition from the white community and state government, and under protection of the U.S. Army’s 101st Airborne Division and National Guardsmen at the direction of President Eisenhower; these nine brave students helped pave the way not only for desegregation of public schools, but ultimately the desegregation of our communities and workplaces.
The Little Rock Nine were instrumental in the continued Civil Rights Movement, and the Civil Rights Act that led to the formation of the Equal Employment Opportunity Commission. Their fight allowed them to receive the opportunities in education and the civil rights that would later enable them to serve our country in both the public and private sectors of employment, through distinguished careers and military service. They became an Assistant Secretary of the Federal Department of Labor under President Jimmy Carter, a Deputy Assistant Secretary for Work Force Diversity in the Department of the Interior under President Clinton, a reporter for NBC, Army Veterans, accountants, and an employee of the Department of Defense. These opportunities may not have been afforded them, or many others, had they not faced opposition and attended Central High.
If you are not familiar with the Equal Employment Opportunity Commission, and the law:
HR Strategies is here to aid client companies with employment regulations, including EEO. Call us today!