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Are You Prepared for the New Overtime Rules?

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.

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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

Tuesday Tip: Salary Exempt Absenteeism

Employers should be careful how they deal with absenteeism by exempt employees.

Don’t dock an exempt employee’s paycheck for missing less than one full day of work because it could destroy their exemption and entitle them to time-and-a-half for all overtime they have worked in the past or work in the future. However, the FLSA does allow for partial day absences to be paid through an employee’s accrual bank of PTO, Vacation, or Sick hours. The only exception for docking a salary exempt employees pay for a partial day absence is if the absence is covered by the FMLA, and the employee has exhausted their accrual bank hours.

Full Day deductions of pay from a salary exempt employee are allowed only under the following circumstances:

  • dilemmaDuring the initial or final week of employment the employees pay may be reduced to reflect the actual hours worked.
  • Full-day absences for personal reasons.
  • Full day absences for disciplinary suspension for safety violations.
  • Full day absences in which an employee has exhausted their entitled Paid Leave plan balances.
  • FMLA Absences.

Two other attendance issues protected by law are employees called to jury duty and employees who request time off for religious reasons. State and federal laws generally require employers to give workers leave when called to serve on a jury. And employers may have to bend their attendance rules to accommodate a worker’s religious practices or beliefs.

A key to curbing abuse is to have an absenteeism policy that clearly sets forth which absences are allowed, and what behavior will subject the employee to discipline.

Tuesday Tip: Rounding Hours

time-for-work-clock

Do you round employees’ hours worked? If you choose to round, do so cautiously to reduce the risk of a wage and hour claim. Employee time must be rounded up and down uniformly (e.g. don’t always round down). Structure rounding to ensure employees are paid fully for all hours actually worked and overtime is calculated properly.

Tuesday Tip: Breaks & Lunches

Lunch.


Employers often have questions regarding paying or not paying for Breaks & Lunches. 

Rule of thumb: 20 minutes or less = Paid & more than 20 minutes = UnPaid.

According to the US DOL Wage and Hour Division Fact Sheet #22: “Rest periods of short duration, usually 20 minutes or less are customarily paid for as working time. These short periods must be counted as hours worked. Bona fide meal periods (typically 30 minutes or more) generally need not be compensated as work time. The employee must be completely relieved from duty for the purpose of eating regular meals. The employee is not relieved if he/she is required to perform any duties, whether active or inactive, while eating.”

If you have questions or concerns regarding time for breaks and meals, please contact your HR/Client Services Representative.

Important Wage & Hour Update

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.
  1. Keeping the levels chained to the 40th and 90th percentiles of earnings.
  2. 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.

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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.

The Ups and Downs of Rounding Hours Worked

overtimeDo you round employees’ hours worked? If you choose to round, do so cautiously to reduce the risk of a wage and hour claim. Employee time must be rounded up and down uniformly (e.g. don’t always round down). Structure rounding to ensure employees are paid fully for all hours actually worked and overtime is calculated properly.

Need help?

Call one of our HR Professionals at 770-339-0000 to review your rounding practices.

FLSA Lawsuits Continue to Rise and Hit an All-time High

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

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