New DOL Overtime Rules

By: Frank N. Lago, Esq.

The Fair Labor Standards Act (FLSA) guarantees a minimum wage for all hours worked during the workweek and overtime pay of 1.5 times the employee’s regular rate of pay for hours worked over 40 in a workweek. The DOL has revised the rules that apply to executive, administrative, professional, and computer employees, generally known as “white-collar” workers. These new rules do not apply to employees who are exempt from over-time pay under Section 7(i) of the FLSA. Those employees typically earn more than 50% of their pay from commissions. To determine if an employee is exempt from having to be paid over-time, the employer must apply two test, the threshold test and the duties test.

The Threshold Test. If the white-collar employee earns less than $913 a week, which is $47,476 a year, the employee is entitled to overtime pay for hours worked over 40, regardless of their job duties and responsibilities. If they make more than this amount, they will qualify for overtime only if they meet the standard duties test, discussed below. This is an increase from the previous amount established in 2004 of $455 per week. The threshold will be adjusted every three years, and adjusted to the salary level of the 40th percentile of weekly earnings of full time salaried workers in the lowest-wage census region according to the BLS. White-collar workers who earn less than the $913 per week will be eligible for overtime.

When calculating the salary of an individual, nondiscretionary bonuses and incentive payments, including commissions, can satisfy up to 10% of the standard weekly salary, but the remaining 90% needs to be paid on a regular basis, provided the bonuses are paid at least quarterly. Additionally, if at the end of a quarter, the employee’s salary is less than the $913 per week, the employer will have one week to make a catch-up payment to bring that employee to the threshold limit, so long as the shortfall is only 10% of the salary level.

Here is the example from the final rule. “In January, February, and March, Employee A must receive $821.70 per week in salary (90 percent of $913), and the remaining $91.30 in nondiscretionary bonuses and incentive payments (including commissions) must be $131 paid at least quarterly. If at the end of the quarter the employee has not received the equivalent of $91.30 per week in such bonuses, the employer has one additional pay period to pay the employee a lump sum (no greater than 10 percent of the salary level) to raise the employee’s earnings for the quarter equal to the standard salary level.”

The Duties Test. If the employees “primary duty” is as an “executive,” “administrative,” or “professional” employee, they are exempt from earning overtime pay.  An executive is someone: whose primary duty in management of the business; who customarily and regularly directs work; and who has the authority to hire or fire other employees or advise on their status.

An “Administrative” employees is an employee: whose primary duty is the performance of office or non-manual work directly related to the management or general business operations; and whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. “Matters of significance” refers to the level of importance or consequence of the work performed.

A “professional employee” is an employee: whose primary duty is the performance of work that requires knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction or requires invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

Highly Compensated Employees. If the employee earns more than $134,000, regardless of duties, they are exempt from overtime pay.

We can help. The attorneys at Walk Law Firm, PA is experienced in assisting its clients with FLSA audits, overtime, timekeeping, and pay practices and policies.  We understand how you have to comply with the legal requirements while growing and advancing your business.  Please feel free to call one of our attorneys at (813) 999-0199, or contact us via our website at www.WalkLawFirm.com Please note the above example is a simple scenario that does not involve bonuses, salary deductions, or any other factor that could affect how the effective hourly rate, overtime rate, and overtime pay are calculated.  While FLSA appears simple, there are a myriad of rules involving its applications and possible misapplications by businesses.

When the DOL Proposes Changes to the Overtime Rules, Employers Must Take Note

WHEN THE DOL PROPOSES CHANGES TO THE OVERTIME RULES, EMPLOYERS MUST TAKE NOTE.  In 2014, 8,086 lawsuits were filed in federal courts for violations of pay practices under the Fair Labor Standards Act (“FLSA”).  Of these, 1,837 lawsuits, or approximately of 23% of all FLSA lawsuits in the United States, were filed in Florida.  In March 2011, a Florida-based company paid more than $754,000 in overtime back wages following a finding by U.S. Department of Labor (“DOL”) that its temporary supervisors were misclassified as exempt employeesSimply, improper time and pay practices are costly mistakes.

Earlier this month, the DOL proposed changes to the rules governing the white-collar exemptions (executive, professional, administrative, highly compensated, and computer related employees) to the overtime requirements under the FLSA.  The DOL estimates that the proposed rule changes will extend overtime protections to an additional 5 million employees.  Any business with at least 1 employee, should:

  • Understand the existing rules and proposed changes
  • Assess the impact of how the proposed changes will affect employee classification, timekeeping and pay practices, and payroll
  • Consider submitting comments to the DOL concerning how the proposed changes will affect your business. You may do so at: regulations.gov  on or before September 4, 2015.

THE EXISTING RULES AND THE PROPOSED CHANGES

Currently, under the FLSA, all employees covered by the Act, unless they specifically exempted, must receive overtime pay for hours worked in excess of 40 in a workweek at a rate not less than time and one-half their regular rates of pay. Employees who fall within the white collar exemptions are not entitled to receive overtime pay — regardless of the number of hours they work within a workweek.  To fall within one of these exemptions, employees must (1) be paid on a salary basis, (2) be paid at least a fixed minimum salary per week of at least $455.00 per week ($23,660.00), and (3) meet certain requirements as to their primary job duties that are specific to each exemption.

For more detailed discussions on the FLSA, 
please see the videos on the FLSA previously made by our new Of Counsel 
Attorney Kerry Raleigh at:
·         Introduction to FLSA
·         Employee Overtime:  Common Mistakes & Perceptions
·         Employee Overtime: Employers Need to Get It Right

THE PROPOSED CHANGES:

The DOL proposes three key changes to:

  • Set the standard salary requirement for the white collar exemptions from $455.00 per week to the 40th percentile of weekly earnings of full-time salaried workers, which is currently $921.00* per week ($47,892.00* annually);
  • Increase the total annual compensation requirement for the highly compensated employee exemption to the annualized value of the 90th percentile of weekly earnings of full-time salaried workers, which is currently $122,148.00* annually; and
  • Establish a mechanism for automatically updating the salary and compensation levels going forward to ensure that they will continue to provide a useful and effective test for exemption.

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Key Reasons to Create an Employee Handbook— or at least appropriate policies

An Employee Handbook organizes and contains company policies and procedures. There are numerous reasons for employers to choose to issue an Employee Handbook or Employer Policy Manual. Although there is no federal or Florida law requiring private employers to provide a handbook, there are some communications you are required to make to your employees.

Each month, we receive numerous calls form clients with employees who would like to make a change in how they handle anything from payroll to work hours to ethics matters and use of computers, mobile phones, tablets, internet, social media and websites. Without policies and procedures in place, and without a clear statement of expectations, clients often find themselves stuck on making changes and communicating expectations.

Policies are governed by both federal law and state specific law and regulations. Compliance with both is a necessity. The Federal Department of Labor has a terrific tool called E-laws Adviser. At the Walk Law Firm, we recommend our clients review and use that tool in addition to calling us for advice. It covers wage and hour laws as well as other important matters such as determining if someone and independent contractor or an employee.

At the Walk Law Firm, we pride ourselves in assisting our clients with practical advice that is compliant with the law. Not every decision is black and white and when making decisions to eliminate a position or downsize in general, it is important to seek quality advice. We represent employers primarily, but have also assisted many executives as well as employers with executive compensation matters such as stock bonuses or stock incentive plans or other equity incentive plans, separation agreements and employment agreements.

Employee Handbook FAQs:

  • An Employee Handbook introduces new employees to the company, gives the company a chance to set forth your expectations for your employees, and provides an introduction to the company;
  • An Employee Handbook makes it easier to ensure that all employees receive notice of the company’s policies;
  • An Employee Handbook creates a centralized place for employees to look for answers and guidance on your company’s practices and expectations, and what to do in various situations; and
  • An Employee Handbook and signed acknowledgments of receipt can assist in an employer’s legal defense, such as when non-compliance leads to termination of employment or another kind of adverse employment action.

Do Not Inadvertently Create a Contract

  • Employee Handbooks must be drafted in a manner that does not create legal obligations that the employer did not intend, and contain provisions reserving certain employer rights. Preparation of the handbook or at least review by your counsel is crucial.

Maintaining a Handbook

  • Employers must review Employee Handbooks periodically to ensure that all policies are current and lawful. At a minimum, a handbook must be reviewed and revised, if necessary, when there is a change in the law, employer policies or procedures, and when the employer expands into new states.Employer