Flsa overtime acvb

The New Overtime Regulations September 2016 Stanford G. Wilson Douglas H. Duerr Sponsored by: ATLANTA CONVENTION & VISITORS BUREAU (ACVB)

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Agenda • • • • •

The new regulation How to comply Strategies to reduce cost impact Communications to employees Questions and answers

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Background • March 2014: President Obama ordered Secretary of Labor to expand number of workers eligible for overtime • July 2016: Notice of proposed rulemaking – Salary increased to $50,440/year – Salary level to change each year – Requested comment on whether other payments could be applied to the minimum salary – Requested comment on whether to change duties test

• September 2015: Comment period closed – Over 270,000 comments submitted Labor and Employment Solutions for Management

New Rule • Announced May 18, 2016 – Effective as of December 1, 2016

• Protecting Workplace Advancement and Opportunity Act – Senate bill to prevent enforcement of new rule – Parallel bill introduced in House – Veto likely?

• Congressional Review Act vote?

• Lawsuit to challenge new regulation?

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New Rule • Raises salary level to $913/week ($47,476/year) – Up to 10% can come from certain other payments – Will be revised every 3 years – Based on 40th percentile of full-time, salaried workers in lowest wage region

• Raises annual compensation for the highlycompensated employee test to $134,004 – Will be revised every 3 years – Based on 90th percentile of full-time, salaried workers in lowest wage region

• No changes to the duty test Labor and Employment Solutions for Management

New Rule - Salary • Weekly salary of $913/week “exclusive of board, lodging or other facilities.”

– Bi-weekly: $1,826 – Semi-monthly: $1,978 – Monthly: $3,956

• Up to 10% may be nondiscretionary bonuses, incentives, or commissions – Must be paid at least quarterly – If salary plus payments not equal to at least 13x minimum salary, must make a “catch up” payment by next pay period – What if separate employment during period?

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New Rule - HCE • Total of annual compensation must be at least $134,004 • Must have a salary of at least $913/week – Same biweekly, semimonthly, or monthly as nonHCE – Must receive full salary; no 10% from bonuses, etc.

• Difference between salary ($47,476/year) and $134,004/year can be from bonuses, commissions, annual catch-up payment, etc.

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How To Comply • Review list of employees currently treated as exempt – How many meet the new threshold of $913/week (or $821.70/week plus incentives)?

– Are they properly classified as exempt based on duties?

– For those who just “miss” the salary level, are they properly classified as exempt?

– Determine how many hours a week the employees work on average.

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Exemptions From Overtime • The biggest FLSA question marks come with regard to the application of the following “White Collar” Exemptions: – – – – –

Executive Exemption Administrative Exemption Professional Exemption Computer Professional Exemption Outside Sales Exemption

• Unless an employee is exempt, he or she must be paid overtime (at time and a half) for all hours worked in excess of 40 hours in a work week.

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Executive Exemption • Current elements of the Executive Exemption: – Must be paid on a salary basis; – Has primary duty of managing business, or department or subdivision of business; – Customarily directs the work of 2 FTE or more other employees; and – Has authority to hire, fire, promote, or make recommendations that are given particular weight.

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Administrative Exemption • Current elements of the Administrative Exemption: – Must be paid on a salary or fee basis; – Has primary duty of performing office, nonmanual work directly relating to management or general business operations of employer or its customers; and – Exercises discretion and independent judgment with respect to matters of significance.

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Administrative Exemption • An employee’s work must be directly related to the running or servicing of the business itself: – Tax, finance, accounting, budgeting, auditing; – Purchasing, procurement, insurance; – Research, safety & health, HR, labor relations, QC, managing computer networks, compliance.

• Production or sales work will generally not qualify for the exemption.

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Administrative Exemption • The DOL determines if an employee has the requisite degree of discretion and independent judgment based on whether the employee: – has authority to formulate, affect, interpret, or implement management policies or operating practices; – carries out major assignments in conducting the operations of the business; – performs work that affects business operations (or segment of the business) to a substantial degree; Labor and Employment Solutions for Management

Administrative Exemption – has authority to commit the employer in matters that have significant financial impact; – has authority to waive or deviate from established policies and procedures without prior approval; – has authority to negotiate and bind the company on significant matters; – provides consultation or expert advice to management; – investigates and resolves matters of significance on behalf of management; and – represents the company in handling complaints, arbitrating disputes or resolving grievances.

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Learned Professional Exemption • Current elements of Learned Professional Exemption: – Must be paid on a salary or fee basis; and – Has primary duty of performing non-manual work requiring advance knowledge that is primarily intellectual in nature and includes consistent exercise of discretion; and – Has specialized academic training.

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Computer Employee Exemption • Current elements of Computer Employees Exemption: – Paid a salary or at an hourly rate of at least $27.63 per hour – Application of systems analysis techniques and procedures to determine hardware, software, and system specifications – Design, develop, documentation, and analysis of computer systems or programs Labor and Employment Solutions for Management

Computer Employees • Current elements of Computer Employees Exemption: – Paid a salary of at least $913/week or at an hourly rate of at least $27.63 per hour – Application of systems analysis techniques and procedures to determine hardware, software, and system specifications – Design, develop, documentation, and analysis of computer systems or programs Labor and Employment Solutions for Management

Outside Sales Exemption • Current elements of the Outside Sales Exemption: – Employee must have the primary duty of: • Making sales (defined to include sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition); and • Obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer.

– The employee must be customarily and regularly engaged away from the employer's place or places of business in performing such primary duty.

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How To Comply • For employees who will become nonexempt: – Convert to hourly or leave salary?

• There is no requirement that non-exempt employees be paid hourly

– If hourly, what rate? There are options: • Take current salary and divide by 40.

• Take current salary and average weekly hours to calculate an amount that, including overtime, would result in same annual pay.

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How To Comply • For employees who will become nonexempt: – If leave salaried, what happens if work overtime?

• Depends upon what the salary is to cover.

• Fixed-pay/Fluctuating-workweek method – Not legal in every state – Administrative burden/easy to mess up – Plaintiffs lawyers zeroing in on this

– Bonus and other incentive pay will increase overtime pay Labor and Employment Solutions for Management

How To Comply • Address hours of work issues: – Stop after-hours access to email? Phone calls?

– Eliminate certain job duties?

– What timekeeping system will be used?

– What about travel?

– Adjust schedule in same week to keep below 40 hours?

• What will happen to benefits (e.g., paid time off, cell-phone reimbursement)?

• Need to manage expectations of their supervisors.

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Communications • Many employees equate overtime exemption to status.

– Change in status may result in reduction of perquisites.

• Begin dialog as soon as practicable to avoid surprise.

• Emphasize change is not a reflection on value of employee.

• Consider implementing timekeeping requirements prior to compensation change.

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Questions And Answers

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Stanford G. Wilson As part of a team with decades of hospitality experience, Stan is a nationally recognized and respected attorney who has successfully defended clients in a variety of high profile cases, many of which established important labor and employment precedent for employers.

Clients seek his proactive advice and counsel because of his extensive experience, expertise and strong focus on client service.

Contact information: Elarbee, Thompson, Sapp & Wilson, LLP 229 Peachtree St. NE Suite 800 Atlanta, GA 30303 (404) 582-84324 swilson@elarbeethompson.com

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Douglas H. Duerr As part of a team with decades of hospitality experience, Douglas focuses on preventive advice and counseling on a wide range of employment and labor issues, while providing experienced counsel in litigation and administrative proceedings. He has been practicing with Elarbee Thompson since 1990 and represents and advises clients throughout the United States.

Contact information: Elarbee, Thompson, Sapp & Wilson, LLP 229 Peachtree St. NE Suite 800 Atlanta, GA 30303 (404) 582-8432 duerr@elarbeethompson.com

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