flsa update: how to plan, prepare & communicate changes to employees
TRANSCRIPT
HRCI & SHRM APPROVED WEBINAR !
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Program numbers sent to you via email upon program completion. !
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THANKS TO OUR SPONSOR
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Jessica Miller-Merrell!@jmillermerrell!
Mike Haberman!@MikeHaberman!
OUR SPEAKERS
Casey Sipe @clsemployerlaw
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TODAY’S AGENDA
• #1 – FLSA Overview!• #2 – Proposed Changes!• #3 – Employer Options!• #4 –Your Communication
Plan !
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Regulates:!
• Overtime!
• Minimum wage!
• Wage recordkeeping!
• Youth employment!
FAIR LABOR STANDARDS ACT OVERVIEW
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In order to be exempt from FLSA overtime and minimum wage rules, an employee must:!
• Be paid a minimum of $455 per week, and!
• Perform exempt job duties and responsibilities!
FLSA EXEMPTION
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No “bright line” test!
DOL definition: “the principal, main, major or most important duty that the employee performs.”!
PRIMARY DUTY
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EXECUTIVE EXEMPTION • Employee must earn a salary of $455 per week or $23,660
annually!
• Primary duty must be managing the enterprise or one of its departments or subdivisions!
• Regularly direct the work of 2 or more employees!
• Have authority to hire/fire or their suggestions as to hiring, firing, advancement or other changes must be given particular weight!
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Employee must earn a salary of $455 per week or $23,660 annually!
Primary duty must be the performance of office or non-manual work directly related to the management policies or general business operations of the employer or its customers!
Primary duty includes the exercise of discretion and independent judgment with respect to significant matters!
ADMINISTRATIVE EXEMPTION
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Employee must earn a salary of $455 per week or $23,660 annually!
Knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction, OR!
Invention, imagination, originality or talent in a recognized field of artistic or creative endeavor!
PROFESSIONAL EXEMPTION
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Employees earning more than $100,000 in annual base salary, commissions and non-discretionary bonuses!
Performs one or more duties of an exempt executive, administrative or professional employee!
HIGHLY COMPENSATED EXEMPTION
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POLL QUESTION #1 MY BIGGEST CHALLENGE REGARDING THE FLSA CHANGE IS…
• UNDERSTANDING THE CHANGES
• WAITING. I’M IMPATIENT
• COMMUNICATING TO EMPLOYEES
• COMMUNICATION TO MANAGERS
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Announced June 30, 2015!
60 day comment period ended September 4, 2015!
247,064 comments received by DOL!
Implementation date: Unknown!
PROPOSED RULEMAKING
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Proposed minimum for exempt employees: $921 per week or $47,892 per year (for 2015)!
For 2016 -> $970 per week or $50,440 per year!
Current minimum for highly compensated employee: $100,000 per year!
Proposed minimum for highly compensated employee: $122,148 per year!
CHANGE #1 – MINIMUM SALARY INCREASE
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Current minimum has been stagnant for decades!
Proposal: set the minimum salary level to the 40th percentile of weekly earnings for full-time salaried employees!
For highly compensated employees set to the 90th percentile!
Use percentages to automatically adjust minimums on a yearly basis!
CHANGE #2 – MINIMUM SALARY FORMULA
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No “bright line” rule for determining whether an employee’s primary duties are exempt!
DOL requested comments on creating a more clear-cut duties test!
Example: California requires exempt employees to spend at least 50% of their time doing exempt work!
CHANGE #3 – THE ‘DUTIES’ TEST
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Bonuses and additional compensation are not included in the calculation for determining whether minimum salary is met!
DOL is requesting comments on including nondiscretionary bonuses in minimum salary calculation !
CHANGE #4 – COMP CALCULATION
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DO NOT PANIC!
Conduct a wage and hour audit!
Review your options for dealing with the new overtime regulations!
Create a plan & communication strategy !
THE CALM BEFORE THE STORM
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• Pay overtime to non-exempt employees for any time worked over 40 hours per week!
• Simplest solution, but could also be the most expensive!
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OPTION # 1 – DO NOTHING
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• Create a policy forbidding or strictly limiting overtime (i.e. not without permission)!
• Possibly hire temporary or part-time workers for cover as-needed!
Option #2:!!
OPTION #2 – LIMIT OVERTIME
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Give pay and give raises to employees who will become non-exempt based on salary, to bring them above the minimum!
This will require some financial calculations to determine whether it will be cost-effective!
OPTION # 3 – INCREASE PAY
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Review the number of hours an employee typically works in a week!
Pay the employee at an hourly rate that will result in the same net salary, including expected overtime!
Downside: Employees may be angry over a perceived reduction in pay!
OPTION # 4 – HOURLY PAY ADJUSTMENTS
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POLL QUESTION #2 THE OPTION MY COMPANY IS LEANING TOWARDS IS…
• DO NOTHING • LIMIT OVERTIME • INCREASE PAY
• HOURLY PAY ADJUSTMENTS
• COMBINATION OF ABOVE
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• Previously exempt employees who work while “off-duty”!
• Email!
• Social media!
• Telephone calls!
• Employee moral!
OTHER CONSIDERATIONS
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DOL also targeting misclassification of workers and offered guidance in July 2015!
No change in regulations (yet)!
DOL essentially will consider whether the independent contractor can exist without the employer (economic realities test)!
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INDEPENDENT CONTRACTORS
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INDEPENDENT CONTRACTOR TEST
• No one factor is determinative but each “yes” increases the chance the independent contractor is misclassified!
!• Is the work integral to the employer’s business?!
• Does the worker lack of managerial skills impact the opportunity for profit or loss?!
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INDEPENDENT CONTRACTOR TEST CON’T
• Does the worker lack an opportunity for profit or loss in the business relationship?!
!• Does the worker simply follow orders (rather than
exercising independent judgment, thought or initiative)?!
!• Does the business exercise a great deal of control
over the worker?!!
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Violations of the Fair Labor Standards Act can result in an award of:!
Back pay for up to 3 years!
Liquidated damages equaling 100% of the back pay!
Attorney’s fees!
POTENTIAL PENALTIES
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COMMUNICATE THE CHANGE
• Start early !• Provide resources –
manager & employee!• Multi-channel !• Provide FAQ’s !• Establish talking points !
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PROVIDE RESOURCES
• Be realistic yet positive !• Seek feedback !• Debrief !!
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FINAL THOUGHTS
• Educate your front line managers on the changes. They are your first line of communication and litigation defense. !
!• Over communicate. Otherwise someone else
will. !
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? ? ? QUESTIONS
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THANKS TO OUR SPONSOR
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Jessica Miller-Merrell!@jmillermerrell!
Mike Haberman!@MikeHaberman!LinkedIn: b4j.co/mhaberman!
SOURCES FLSA/DOL Changes b4j.co/flsa-changes-overview!
FLSA Changes & What You Need to Know !b4j.co/flsa-changes-2016!
FLSA Changes Podcast !b4j.co/flsa-podcast!!
SPEAKERS
LinkedIn: b4j.co/jmillermerrell!
Casey Sipe !@clsemployerlaw!LinkedIn: b4j.co/caseysipe!
FLSA Independent Contract Guidance b4j.co/flsa-contractor-2016!
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HRCI & SHRM APPROVED WEBINAR !
!
!
!
!
!
!
Program numbers sent to you via email upon program completion. !
37!