Questions Answered About the Proposed FLSA Changes: Overtime Rule

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changing from non-exempt to exempt proposed flsa changes flsa proposed changes

Accurately categorizing your employees as “exempt” or “non-exempt” from the Fair Labor Standards Act (FLSA) sounds like a fairly straightforward task. But a closer look at the finer details of the FLSA can quickly turn an easy yes/no question into a complex, and somewhat subjective, analysis or job duties, titles, and compensation.

According to the U.S. Department of Labor’s (DOL) Wage & Hour Division, the current administration is looking to, “simplify the overtime rules for employers and workers alike,” specifically in the area of white collar exemptions, and has recently completed a comment period for new set of proposed overtime rules.

Although it is up for debate whether or not the proposed rules have achieved this goal of simplification, employers need to be aware of what these changes are and begin to prepare themselves for 2016 when some version of these rules are likely to be implemented.

What is changing (more than likely)?

The salary level required to be classified as an exempt employee for both standard and Highly Compensated Employees (HCEs) will increase.

The existing standard salary threshold to qualify as exempt, is set at $455 per week. The existing HCE threshold is $100,000. The proposed new rule sets the threshold for both categories based on average weekly earnings for full-time salaried workers. For standard salaried employees the 40th percentile mark will be used and for HCEs, the 90th percentile will be used. In terms of what these percentiles mean for setting actual dollar amounts, based on 2016 projections from the DOL the new thresholds will be $970 in average weekly earnings for the standard level and $122,148 annually for HCEs.

The bottom line: The specific dollar figures cited in the proposed language may be adjusted in the final rule, but in short, the salary amounts required to be considered exempt from the white collar overtime rules are going up in 2016.

Both salary levels (standard & HCE) will be scheduled to increase on an annual basis.

The numbers currently on the books have not changed since the last set of rule changes in 2004. The latest iteration of the white-collar exemption language will increase annually in one of two ways, either: (1) attaching directly to the 40th (standard) and 90th (HCE) percentiles of earnings for full-time salaried employees or (2) adjusting both levels based on inflation (CPI-U).

The bottom line: Instead of going through the rulemaking process to increase the exemption thresholds, they will go up on an annual basis—based on what statistic is still to be determined.

What else was being considered as part of the proposed rulemaking during the comment period?

The DOL was looking for comments on two additional items, but is not planning to make regulatory changes based on this feedback.

(1) The so called “duty test”, which is the next step in determining an employee’s exempt status, was also up for discussion. However, instead of implementing wholesale, official regulatory changes, the DOL was looking for additional examples of job titles and practical job duties that could be used as guidance for determining exemption status. (2) In addition, they were gathering opinions about whether or not nondiscretionary bonuses can/should be factored into the average weekly earnings of the standard salary calculation.

The bottom line: The DOL wants to gauge if the “duty test” is working as it should and provide more practical guidance to make it more objective. However, they don’t plan to incorporate any official regulatory changes regarding “duties” into the final rule at this time.

What can employers do to prepare?

Until the final rule is announced, the key for employers will be to begin gathering the information necessary to apply the new test once it is known. Not only will this head off any current misclassification that you may uncover in the process, but it also situates employers to act as soon as the DOL releases the final language.

First and foremost, employers may want to perform an internal audit of their job titles and descriptions to ensure that they are appropriately classified as exempt or non-exempt. While employers always make sure jobs are classified correctly at the outset, these duties can look very different a few years down the road.

As individuals and job duties evolve depending on the skill set of the employee, the needs of the organization, or even changes to technology, HR isn’t always kept apprised of these changes in a timely fashion.

Taking stock of exactly what duties are being performed and making any necessary changes to job descriptions on a fairly regular basis can help prevent misclassification. In the case of the proposed changes to the FLSA, going through this internal review process is particularly important for any non-exempt employees making more than the current $23,600 figure, but less than the new threshold.

The bottom line: Be prepared. There is some down time between the close of the comment period earlier this month and the expected announcement of the final rule in 2016. Make use of this time to gather the job duty information now, so you can act promptly and efficiently when the time comes.

ERC Training provides FLSA Training which provides a high-level review of the law's elements and requirements.

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New Rulings and Regulations Impacting HR

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New Rulings and Regulations Impacting HR

From marriage equality to proposed changes to overtime exemptions (not to mention the Supreme Court ruling that again affirmed the ACA), HR professionals across the country are taking a collective breath after a week of landmark rulings and proposed new regulations that impact the employment landscape. Here is what employers need to know (and do) now.
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The 5 Most Common FLSA Exemptions

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The 5 Most Common FLSA Exemptions

The most common FLSA exemptions are white collar exemptions. They can be broken down into five main categories, including:

  1. Executive
  2. Administrative
  3. Professional
  4. Outside sales
  5. Computer

In order for an exemption to apply, an employee’s specific job duties and salary must meet all of the requirements of the Department of Labor’s regulations.

Here is how the FLSA defines exemptions for these various duties.

1. Executive

An employee is exempt from the FLSA as an executive if they regularly perform all of the following:

  1. The employee must be compensated on a salary basis (as defined in the regulations) at a rate not less than $455 per week;
  2. The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;
  3. The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
  4. The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

2. Administrative

This exemption is for employees whose main duties involve the support of the business, such as human resource staff, public relations, payroll and accounting. Generally, administrative employees do not directly produce what the company sells; however, they are at a much higher level than those employees performing clerical work.

The FLSA defines exempt administrative duties as follows:

  1. The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;
  2. The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
  3. The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

3. Professional

Exempt professional employees include lawyers, physicians, teachers, architects, registered nurses, and other employees who perform work that requires advanced education or training. These typically are intellectual jobs, require specialized education and involve the use of discretion and judgment. 

This exemption also includes creative professionals such as writers, journalists, actors and musicians. In general, such jobs require imagination and some unique combination to the employer. 

  1. The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;
  2. The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment;
  3. The advanced knowledge must be in a field of science or learning; and
  4. The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

4. Outside Sales

To qualify for the outside sales employee exemption, all of the following tests must be met:

  1. The employee's primary duty is to make sales or the employee's primary duty is to obtain orders or contracts for services or contracts for the use of facilities for which clients or customers pay
  1. The employee must be customarily and regularly engaged away from the employers place or places of business.

The salary requirements of the regulation do not apply to the outside sales exemption. An employee who does not satisfy the requirements of the outside sales exemption may still qualify as an exempt employee under one of the other exemptions allow

5. Computer

A computer professional can be paid on a salaried or hourly basis, but must receive compensation equal to or greater than:

  • $455 per week if paid on a salary basis (annual salary of $23,660); or,
  • $27.63 per hour, if paid for each hour worked.

Job titles do not determine the exemption status. In order for this exemption to apply, an employee’s specific job duties and compensation must meet all the requirements of the FLSAs regulations. However, the computer exemption does state that an employee must be employed as a:

  • Computer systems analyst, computer programmer, software engineer, or other similarly skilled worker in the computer field; and,
  • The employee’s primary duty must consist of:
    1. The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;
    2. The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;
    3. The design, documentation, testing, creation, or modification of computer programs related to machine operating systems; or
    4. A combination of the aforementioned duties, the performance of which requires the same level of skills.

If you have any additional questions regarding common FLSA exemptions, and are an ERC Member, contact our HR Help Desk or visit the U.S. Department of Labor (DOL) FLSA page at http://www.dol.gov/whd/flsa/.

By providing you with information that may be contained in this article, the Employers Resource Council (ERC) is not providing a qualified legal opinion concerning any particular human resource issue. As such, research information that ERC provides to its members should not be relied upon or considered a substitute for legal advice. The information that we provide is for general employer use and not necessarily for individual application. We also recommend that you consult your legal counsel regarding workplace matters when and if appropriate.

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FMLA Expands to Include More Employees in Same-Sex Marriages

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FMLA Expands to Include More Employees in Same-Sex Marriages

In its 20 plus years on the books, administration of the Family and Medical Leave Act (FMLA) has long been viewed as a complicated and challenging task faced by employers of all shapes and sizes – or at least for those with 50 or more employees.

Despite seemingly countless revisions since its inception, FMLA has become an integral part of US employment law and, despite administrative challenges, has provided families and individuals with previously unimaginable opportunities to take time away from work to care for loved ones without fear of losing their jobs.
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DOL Proposes to Revise FMLA Definition of "Spouse"

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By March 2014 the Wage and Hour Division at the Department of Labor (DOL) will issue a proposal to revise the Family and Medical Leave Act (FMLA) definition of “spouse” based on the Supreme Court’s decision in United States v. Windsor, the agency promised in its Nov. 26, 2013, regulatory guidance.

In Windsor, the Supreme Court ruled that Section 3 of the Defense of Marriage Act (DOMA), which defined “marriage” and “spouse,” was unconstitutional. The court said: “The principal purpose and the necessary effect of this law are to demean those persons who are in a lawful same-sex marriage. This requires the court to hold, as it now does, that DOMA is unconstitutional as a deprivation of the liberty of the person protected by the Fifth Amendment of the Constitution.”

Windsor does not obligate states to recognize same-sex marriages performed in other states, which can be confusing for employers. “It is possible—and preferable from my perspective—that the DOL do away with this confusion and implement a ‘place of celebration’ rule, which would mean the DOL no longer looks to state of residence but to whether the same-sex marriage was valid where performed. This would be a big departure from the current regulations but resolve the challenges employers face in implementing constantly changing state recognition rules.”

DOL enacts Section 408(b)(2) for retirement plan fiduciaries

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Section 408(b)(2), a 2011 regulation from the Department of Labor, requireed retirement plan fiduciaries, including plan sponsors and investment committees, to understand all fees and expenses associated with their retirement plan. Plan sponsors must also be able to determine if their fees are competitive, or “reasonable” in relation to the services they receive. 

The new regulation required:

  • The contract or arrangement must be in writing and reasonable.
  • The services being performed are necessary to establish or operate a qualified plan.
  • No more than reasonable compensation is paid for the services performed.

The DOL required compliance with the regulation on or before Jan. 1, 2012.

Source: Oswald Financial

8 Resources Every HR Professional Should Know About

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We’ve compiled a collection of eight (8) of our favorite HR resources – free comprehensive tools and information that many of our members find valuable for common tasks like staying compliant, administering FMLA, or finding and supporting employees.

1. Staying Legally Compliant

The Department of Labor (DOL) offers a variety of e-law Advisors, interactive tools that provide information about a number of federal employment laws. Employers typically find these tools very helpful in providing greater understanding of compliance and employment law information. Specific e-law Advisors include FLSA, H1-B, Health Benefits Advisor, OSHA, Drug Free Workplace, Contractor Compliance, and more. Similarly, the DOL also provides an Employment Law Guide that helps employers create policies for their handbook.

2. Accommodating Employees

Employers frequently need to support employees through difficult conditions and circumstances. Whether you’re accommodating employees to be compliant or to better support employees as you create a great place to work, the Job Accommodation Network (JAN) is an ideal resource that provides ideas and examples on what level of accommodations and flexibility are appropriate for different situations. It also helps employers better understand a variety of disabilities and psychological/medical conditions that impact their workforce.

3. Administering FMLA

Leave administration, particularly FMLA, is one of employers’ greatest responsibilities and challenges. Employers are frequently looking for resources surrounding administration of this law to help them administer it. This site is one of our members’ favorites as it highlights all of the most common forms, fact sheets, and general guidance for administering family medical leave required by the law.

4. Creating and Updating Job Descriptions

O*Net is a comprehensive, free resource for job analysis and job description information. It provides detailed information including a summary of a job, alternate job titles, tasks, tools and technology used, knowledge, skills, abilities, work activities, and work context. It even contains information on interests, work styles, work values, wages and employment trends, and education/training requirements relevant to a specific job. The tool is useful for employers that are creating job descriptions and supports a range of other HR functions like hiring and performance management. The Dictionary of Occupational Job Titles is also another ideal resource for job related information, included within O*Net.

5. Developing Employees

Career One-Stop has all the components of a comprehensive career development service (without the cost). Employees can explore careers, assess themselves, write job descriptions, evaluate and profile their skills, and find developmental programs and resources. This tool, as well as the Ohio Workforce Informer, Riley Guide, and BLS Career Guide to Industries, are other valuable career development tools for employees to utilize when developing themselves and can complement employers’ career development programs.

6. Staffing and Workforce Planning

Employers often seek information about local employment trends that impact their business for staffing and workforce planning purposes. While the Bureau of Labor Statistics (www.bls.gov) provides ideal national information for this purpose, most organizations don’t realize that the state of Ohio provides a labor market website that details information about local employment trends and projections, current employment statistics, supply and demand, and skills/training. In addition, Ohio Means Jobs is a free website to search for candidates and post jobs that also helps employers recruit and staff.

7. Auditing Wage & Hour Practices

FLSA compliance is one of ERC’s most common questions and an area where many employers may find themselves non-compliant. In the event of a Wage & Hour audit, the DOL provides a checklist of items requested. This checklist is not only ideal for organizations being audited by the DOL, but also for those that want to prepare for an audit. You can download this checklist here.

8. Posting Requirements

The DOL makes posting requirements available to employers including information about what organizations must post, citations and penalties, and other information. Click here to view these requirements. Employers can also download PDF posters on this site.

In conclusion, the Department of Labor and other governmental agencies can offer free resources and support for your organization. With vast amounts of information, online tools, free training and webinars, and access to experts, they can be very helpful for employers and particularly HR departments – often in ways that many organizations don’t anticipate.

Additional Resources

HR Training
Gain even more crucial skills and resources to be successful in your HR role through various ERC HR training courses. For more information on these informative training courses which cover all aspects of HR including employment law, compensation, benefits, performance management, orientation, communication, please click here. To view other upcoming HR programs, click here.

HR Help Desk
ERC’s Help Desk staff is exceptional at working with governmental agencies to answer employers’ questions, resolve problems, and locate information, resources, and forms to meet your needs – especially when you don’t have time to do the research yourself. Just e-mail hrhelp@yourerc.com for assistance.

HR Practices
Benchmark how your HR practices compare to other Northeast Ohio employers by participating in our Policies and Benefits Survey. This survey covers benefits, compensation, recruiting, hiring, communication, training, development, and safety practices. Click here to participate.

Other HR Resources
In addition to resources discussed in this article, ERC members enjoy an array of additional resources related to compensation, benefits, and policy information; HR Help Desk service, sample forms, job descriptions, and policies; cost-savings (and free services provided by some of our Preferred Partners); and more. Click here to find out more about the benefits of being an ERC member.