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Department of Labor Exemption Proposal & Other Laws Affecting

DIDD ProvidersAsia N. Diggs, Esq.

General Counsel, Dir. of Compliance & Human Resourcesasiadiggs@meritan.org

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WHITE COLLAR EXEMPTION CHANGES

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With the new wage and hour changes looming on the horizon, DIDD employers need to ensure that appropriate steps are taken to minimize potential risk and liability.

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Violation of the FLSA =

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WHAT IT COULD COST YOU1. Unpaid minimum wages

2. Unpaid overtime

3. Liquidated damages (equal to the amount of #1 and/or #2)

4. Costs

5. Reasonable attorneys’ fees

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SO WHAT DOES THE FLSA WANT US TO DO???

1. Pay the Federal or State MINIMUM WAGE (whichever is higher) for each hour worked.

2. Pay overtime to non-exempt employees at the rate of 1.5 times the regular rate of pay for any hours worked over 40 in a workweek

TN: $7.25 (no law) KY: $7.25 NC: $7.25 MS: $7.25 (no law)MO: $7.65 WV: $8.00 GA: $5.15/$7.25 OH: $8.10AR: $7.50 4+ees VA: $7.25 AL: $7.25 (no law) Federal: $7.25

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WHAT IF YOU DON’T WANT TO PAY OVERTIME

You must ensure that the relevant position meets two tests to qualify for an

overtime exemption.

1. Salary Test

2. Duties Test

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CAVEATS ABOUT FLSA EXEMPTIONS-Every employee is NOT exempt

-Paying someone a “salary” does not automatically make them exempt

-The employer is presumed to be “doing it wrong” and the employee is actually entitled to minimum wage and overtime – all of which is on the employer to prove otherwise.

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SALARY AND SALARY BASIS – AS IT EXISTS TODAY

29 C.F.R. § 541.602

Salary basis means the employee “regularly receives, each pay period…a predetermined amount [$455/week] consisting all or part of the employee’s compensation…not subject to reduction because of variations in the quality or quantity of work performed.”

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CAUTION: IMPROPER DEDUCTIONS!!!If you want to preserve the FLSA exemption, ensure that you are only making the following deduction:

A whole day absence for illness/disability if employer has bona fide sick/disability plan

A whole day absence for personal reasons other than illness or accident

Absence for any time period covered by FMLA

Absence due to disciplinary suspensions for workplace safety rules of major significance or workplace conduct rules (Ex: violence, discrimination, etc.)

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SALARY BASIS: AS IT “MIGHT” BE-To meet the salary basis portion of the exemption tests, employers will need to increase the current predetermined weekly amount ($455/week to $970/week)!

-If an employee does not make at least $970/week ($50,440/year), the person fails the first test and you can not consider the duties performed by the employee. This employee is NOT exempt.

DO NOT PASS GO, DO NOT COLLECT $200

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WHAT IS THE DOL THINKING?!?!?

-Over 21 million employees affected by proposal

-Non-profit, social services, small businesses and government entities are left high and dry

-Proposal is drafted to increase the predetermined salary amount each year

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DOL RATIONALE-Most W/H practitioners would agree that the current weekly rate is low and should be modified

-In the past, the DOL relied on weighted data in determining the salary levels that would serve as the predetermined threshold for exemption.

-This minimized the impact on depressed regions and industries.

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DOL RATIONALE (cont.)-The proposed amendment changes this approach of using weighted data, and instead looks at BLS data related to the compensation of ALL American salaried employees – without regard to depressed regions and industries.

-New salary level represents the 40th percentile of earnings for all full-time salaried workers throughout the U.S.

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DUTIES TESTThe duties test requires that the individual’s job duties primarily involve executive, administrative, and professional duties as defined by DOL regulations.

Job titles do not matter!!! Actual duties as performed along with how the particular job tasks fit into the employer’s overall operation matter.

Persons who hold the same job title may be classified differently.

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EXEMPTIONSExecutive: 29 C.F.R. § 541.100 - § 541.106

Administrative: 29 C.F.R. § 541.200 - § 541.204

Professional: 29 C.F.R. § 541.300 - § 541.304

Computer Professional: 29 C.F.R. § 541.400 - § 541.402

Outside Sales: 29 C.F.R. § 541.500 - § 541.504

Highly Compensated Employee - 29 C.F.R. § 541.601

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DOL ON DUTIES The DOLS’s proposed amendments do not specifically propose

changes to the duties test.

Asked for comments regarding changes to the duties test (considering changing): What changes, if any should be made? Should employees be required to spend a minimum amount of

time performing work that is the primary duty to quality for the exemption?

What should the minimum time spent be? Should California’s 50% rule be adopted?

Over 250,000 comments received during comment period

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DOL ON DUTIESPre-2004 Long and Short Tests were a series of questions to help determine exemption status.

One major difference between the long and the short was that the long test required the employer to confirm that the employee devoted no more than 20% of weekly hours to work not closely related to the primary duty (or otherwise performing non-exempt duties).

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DOL ON DUTIES

How can the DOL create final regulations regarding the duties test that were never proposed?

Logical Outgrowth Doctrine – a proposed rule may differ from the final rule so far as the final rule is a logical outgrowth of the former

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IMPACT Historically, nonprofit, social services, and government sector jobs pay lower wages, but higher benefits in the workplace.

Fewer white collar employees being treated as exempt – now eligible for overtime. (Ex: Case Managers, other exempt office personnel, etc.)

Small businesses unable to survive.

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IMPACT Employers forced to create a part-time workforce to avoid overtime.

States may increase their thresholds.

Disproportionate impact on certain regions and industries. (Ex: social services, non-profit, government, retail, restaurant, etc.)

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BOTTOM LINEEmployers will be required to perform a wage/compensation audit of all currently exempt employees making $55,000 or less.

These audits and reclassifications will need to be performed frequently, possibly annually or every two years.

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WHAT MIGHT THE AUDIT LOOK LIKE? Determine who is classified as exempt and earns $55,000 or less.

Perform a job analysis that includes the following:1. Review minimum qualifications established for the job,

including education, on-the-job training and experience.2. Review prior job descriptions, job questionnaires, and

related documentation.3. Confirm with managers that duties and qualifications are

accurate.4. Conduct workflow reviews—a useful tool in ascertaining job

functions, processes, job boundaries and organizational operations. Schematics and charts can also prove to be helpful.

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WHAT MIGHT THE AUDIT LOOK LIKE? (cont.) Perform a job analysis that includes the following:

5. Gather organizational charts for departments and positions being reviewed.

6. Review policy manuals to determine functional autonomy of positions.

7. Gather prior performance reviews which document duties and responsibilities or respective positions.

Resource: FLSA Exemptions Flow Chart, SHRM, http://www.shrm.org/TemplatesTools/Toolkits/Documents/FLSAExemptionsFlowchart.pdf

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WHEN WILL THE NEW EXEMPTION REGULATIONS GO INTO EFFECT?

No one knows, but it is suspected in the late winter of 2015 or first quarter of 2016.

Employers will have 60 days after publication of the Final Rule to comply.

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CHANGES TO COMPANIONSHIP

EXEMPTION

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COMPANIONSHIP EXEMPTION -THEN FLSA, as originally enacted, only covered domestic service

workers if they worked for a covered enterprise, i.e., an agency or business subject to the FLSA or were an individual engaged in interstate commerce, an unlikely occurrence.

Two exemptions carved out in DSW category where no minimum wage or overtime required:

1. Casual babysitters and Companionship services for individuals who (because of age or infirmity) are unable to care for themselves 29 U.S.C. 213(a)(15); and

2. “Any employee who is employed in domestic service in a household and who resides in such household.” 29 U.S.C. 213(b)(21)

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LEGAL HISTORY 10/13/13: Final Rule issued; scheduled to take effect 1/1/2015

6/2014: Association of home care companies filed a lawsuit in federal court challenging the Final Rule

10/9/14: DOL announced delay in enforcement regarding companionship exemption for 6 months from 1/1/2015-6/30/2015

12/2014 and 1/2015: U.S. District Court Judge Richard Leon of D.C. Circuit issued opinions and orders vacating the Final Rule’s revised third party regulation and revised definition of companionship services, respectively.

2/20/2015: The Department of Labor appealed the district court’s orders to the U.S. Court of Appeals for the D.C. Circuit. Home Care Association of America v. Weil, No. 15-5018 (D.C. Cir.).

3/30/15: Plaintiff-Appellees (home care association) filed appeals brief in response to DOL

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LEGAL HISTORY (cont.) 8/21/15: Court of Appeals issued a unanimous opinion affirming the validity of the Final

Rule and reversing the district court’s orders; Decision to become effective 10/13/15

The home care associations asked the Court of Appeals and the Chief Justice Roberts of the U.S. Supreme Court to delay the date the Court of Appeals opinion would become effective, but both requests were DENIED.

10/13/2015: Final Rule became effective

 11/12/15: DOL will begin enforcement of the Final Rule

November 12 - December 31, 2015: DOL will exercise prosecutorial discretion in determining whether to bring enforcement actions, with particular consideration given to the extent to which States and other entities have made good faith efforts to bring their home care programs into compliance with the FLSA since the promulgation of the Final Rule.

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COMPANIONSHIP EXEMPTION -NOWSeveral significant changes from the prior regulations, including:

(1) the tasks that comprise “companionship services” are more clearly defined;

(2) the exemptions for companionship services and live-in domestic service employees are limited to the individual, family, or household using the services; and

(3) the recordkeeping requirements for employers of live-in domestic service employees are revised.

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COMPANIONSHIP EXEMPTION -NOWMinimum Wage and Overtime Protections: Prohibits third party employers, such as home care agencies, from claiming the companionship or live-in exemptions.

Companionship Services: The provision of fellowship and protection for an elderly or infirm person who requires assistance in caring for himself. Care must be attendant to and in conjunction with the provision of fellowship and protection and not exceed 20% of the total hours worked by person per workweek.

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COMPANIONSHIP EXEMPTION –NOW Medically Related Services. Companionship services definition doesn’t include the provision of medically related services typically performed by trained personnel. Performance of medically related tasks during the workweek results in loss of the exemption.

Live-In Domestic Service Employees. Live-in domestic service workers who reside in the employer’s home permanently or for an extended period of time and are employed by an individual, family, or household are exempt from overtime pay, although they must be paid at least the federal minimum wage for all hours worked. Live-in domestic service workers who are solely or jointly employed by a third party must be paid at least the federal minimum wage and overtime pay for all hours worked by that third party employer.

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COMPANIONSHIP EXEMPTION –NOW

Third Party Employers. Third party employers of direct care workers (such as home care staffing agencies) are not permitted to claim either the exemption for companionship services or the exemption for live-in domestic service employees.

Paid Family or Household Members in Certain Medicaid-funded and Certain Other Publicly Funded Programs Offering Home Care Services. FLSA does not necessarily require that once a family or household member is paid to provide some home care services that all care provided by that family or household member is part of the employment relationship.

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IMPACTEvery 3rd party employer that employs workers in the field of personal care, home care, or personal aid needs to take efforts to comply with new overtime requirements.

Any employer who has a live-in model for home care needs to ensure minimum wage and overtime requirements are being met.

Travel time, where applicable, will need to be factored in as time-worked for employees who service more than one client in a day.

Over 2 million home care workers expected to be impacted.

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DANGER ZONE

Because the Final Rule was issued in October 2013 with an original effective date of January 1, 2015, no one yet knows whether plaintiffs (i.e., employees) can pursue claims for unpaid minimum wage and overtime from alleged violations of the Rule dating back to January 1, 2015.

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BOTTOM LINE Home care agencies should be making every effort to comply on or before November 12, 2015.

Ensure that non-exempt employees, including live-ins, are paid at least the hourly minimum wage and earn overtime when applicable.

Reinforce policy that all time must be recorded and reported to the employer (including meal and travel time, where applicable).

Train ALL employees on timekeeping procedures, what are considered “hours worked,” prohibition against off-the-clock work, travel time and sleep time.

Employ a publicized multi-faceted mechanism that allows employees to report non-compliance (i.e., hotline, HR, or other managers).

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OTHER LAWS TO NOTE

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1. Mandatory Paid Sick Leave for Employees of Government Contractors

https://www.whitehouse.gov/the-press-office/2015/09/08/executive-order-establishing-paid-sick-leave-federal-contractors

2. Broader Joint-Employer Standard

3. Independent Contractor Misclassifications

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THANK YOU!!!