significant changes to overtime pay rules and how they will impact you
TRANSCRIPT
Significant Changes To Overtime And How They Will Impact You
301 S. Polk, Suite 422Amarillo, TX 79101
(806) 220-0150 [email protected] www.adairbuckner.com
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Exemption from OvertimeNew minimum salary= $47, 476
($913 per week)No changes to duties test3 year automatic increasesAbility to count nondiscretionary
bonuses, commission and incentive payments
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Federal ExemptionsMinimum Wage & Overtime/Records
Executive Administrative Professional Highly Compensated Outside Salesman
Overtime Only
Retail or service-- commission paid (subject to minimum pay rules)
Computer Professional (subject to minimum pay rules)
Motor Carrier
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Retail or Service Commissioned Exemption
The FLSA also has an exemption from the overtime pay requirements for certain commission employees of a retail or service establishment. For this exemption to apply, three requirements must be met: (1) The employee must be employed by a retail or service establishment; (2) The employee’s regular rate of pay must exceed one and one half times the applicable minimum wage; (3) more than half of the employee’s total earnings in a representative period must consist of commissions on goods and services.
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Three Factors To Look At To Determine Exemption
• How is the employee paid?• How much is the employee paid?• What does the employee do?
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The employee must be:1. paid by a salary, 2. must make a minimum of $913 per week, 3. and must meet all of the qualifications of one of the duties to be classified as exempt.
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The Duties Test1. Executive2. Administrative3. Professional4. Highly Compensated Employees
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CAUTION!EXEMPT
Only means that these employees generally meet all the criteria and are generally exempt from overtime.
NOT EXEMPTOnly means that these employees generally do not meet the criteria for this exemption and generally are not exempt.
WARNING! Job titles are not controlling
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Executive Exemption• Receives a salary or guarantee of at least
$913/week, and • Is in charge of a department or sub
department, and• Supervises the work of two or more full time
employees, or their equivalent and• Has power to hire, fire, promote, or change
status of other employees or suggestions given particular weight.
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Administrative Exemption• Primary duty is performing non-manual
work related to management policies or general business operations, and
• Exercise discretion and independent judgement with little or no supervision, and
• Receives a salary or guarantee of at least $913/wk.
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Professional Exemption• Knowledge of an advance type in a field of
science or learning that is 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,
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Highly-Compensated Employees• Performs office or non-manual work, and• Is guaranteed total annual compensation
of at least $134, 004 per year, and• Performs any one of the exempt duties of
an executive, administrative or professional employees.
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Wage Calculation Issue: Failing to pay all the overtime that is due to an employee
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Calculating Overtime (Premium)
1. Divide amount of salary, bonus, commission, etc. received in a week by the hours worked in the week.
2. Then take ½ of that figure times the number of overtime hours.
3. That gives you the additional overtime due.
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Example• Warranty Administrator is paid salary of
$600/wk. plus monthly bonus of about $700/month
• She works 50 hours a weekBUT she’s NOT EXEMPT!!!
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DOL’s calculation• 2 years overtime on salary:
$6,240• 2 years overtime on commission:
$1,680TOTAL DUE: $7,920
* DOL may push for 3 years in future investigations.
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Private Lawsuit Calculation3 years overtime on salary: $9, 3603 years overtime on commission:
$2, 520Liquidated damages:$11,880Attorneys fees: $25,000TOTAL DUE: $48,760
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Payroll Practices: Red FlagsWatch out for “red flags” regarding payroll practices:• Improper deductions from salaried employees• Improper calculation of “regular rate”• Job descriptions for exempt employees that do not
reflect exempt duties• Nonexempt employees working through meal breaks• Employees who routinely stay late but have no
overtime• Not complying with employer’s own written policies
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Commission-Paid Exemption
• Employed at a “retail” establishment, and • Receives the majority of his/her compensation
from “commissions”, and• Receives at least time and one-half minimum wage for all hours worked in an overtime week
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Changes to Motor Carrier Act Exemption
• Before 2005, the FLSA’s motor carrier exemption applied to all employees who drove a motor vehicle in interstate commerce regardless of the size of the motor vehicle or the number of passengers transported in the vehicle.
• As of August 10, 2005, the motor carrier exemption only applies to drivers of vehicles that weigh in excess of 10,001 pounds.
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Changes to Motor Carrier Act Exemption (continued)
Bottom Line Employees who deliver non-
hazardous materials in vehicle weighing less than 10,001 pounds (which includes cars and most light trucks) are no longer exempt because they do not drive commercial motor vehicles.
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“Are they exempt from overtime?”
• What does the employee spend the majority of his time doing?
• How is employee’s pay plan structured?• Does employee fit exactly into one of
the nine exemptions?
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Irrelevant Factors• Employee is paid a salary – unless meets other
factors for total compensation and duties test• “We consider employee a manager”• Employee could supervise someone
sometimes• “When employee was hired, we agreed no
overtime would be due”• “We give them comp time when they work
over 40 hours” – Private employers cannot do this.
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Common Classification Mistakes
• Treating trainees as exempt before they fully qualify as exempt
• Failing to guarantee the proper minimum salary
• Prorating the salary of a part-time exempt employee to less than $913/week
• Making improper deductions from salaries of exempt employees
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If an employee is not exempt from overtime…
The employer must pay overtime premium on all compensation the employee receives
$ Hourly wages $ Salary $ Commissions $ Bonuses $ Spiffs $ Payments from the manufacturer
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Options for Dealing with New Exemption
Rules• Increasing salary to meet standard salary level
threshold;• Converting to non-exempt and paying overtime;• Lowering base wages to take overtime into
consideration;• Slowing the hiring of full-time workers;• Hiring additional workers, especially part-time;• Considering non-discretionary and commission
payouts that may now be counted toward the salary threshold with some limitations;
• Reviewing incentive eligibility, targets and funding mechanisms to address new regulations, help offset cost increases and remain competitive.
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Questions and Answers
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