Navigating the New

FLSA Overtime Rules

Crawford Advisors Webinar Series | July 2016

Presented by: Cindy Wagner, Manager of HR Professional Services

About The Webinar

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Cindy Wagner, Manager of HR Professional Services

About Our Speaker

Cindy possesses 30+ years of progressive and diverse human resources,

compliance, and leadership experience that spans from start-up to established

organizations. She has extensive hands-on experience leading HR initiatives

including policy design, performance management, recruiting, compliance

reporting, compensation, benefits administration, HRIS implementation, HR

workflow development, leadership development and training, safety

management, mergers and acquisitions, and payroll administration.

Cindy’s employment history includes positions in both the private and public

sectors supporting employers with employee populations of 100 – 7,500

employees. Her vast level of expertise includes seven recent years as a Vice

President of Human Resources and Payroll Services in a leadership and

operations role. She recently joined the Crawford Advisors/HRtactix Team as

Manager, HR Consulting Services and is focused on providing human resources

strategic based solutions and compliance support to our

clients. She is active in the HR business community and is a

member of SHRM, CHRA, CC SHRM and the Hunt Valley

Business Forum.

• A baseline review of the Fair Labor

Standards Act (FLSA) – history and

intent of the law

• Review of the final FLSA Overtime rules

• New thresholds for exemption status

• Impact on business operations

• Considerations for compliance with

new requirements

Agenda

Introduction

Fair Labor Standards Act (FLSA) of 1938

• Establishes minimum wage, overtime

pay, recordkeeping, and Youth

Employment Standards

• Affects full-time and part-time

employees

• Applies to private sector and

federal, state and local

governments

Administration & Enforcement

• The Wage and Hour Division – private, state

and local government employment. Plus,

federal employees of the Library of Congress,

U.S. Postal Service, Postal Rate Commission,

and the Tennessee Valley Authority.

• The U.S. Office of Personnel Management –

Employees of other Executive Branch

Agencies

• The U.S. Congress for covered employees of

the Legislative Branch

Minimum Wage for Non-Exempt Workers

Federal:

• Entitled to a minimum wage of no less than $7.25 per

hour ($2.13 for tipped employees)

• Not adjusted since 2009

State (MD):

• Entitled to a minimum wage of no less than $8.75

(effective 7/1/16) per hour ($3.63 for tipped employees)

• Special provisions apply to workers in American Samoa

and the Commonwealth of the Northern Mariana Islands

• Non-exempt workers must be paid overtime pay

• One and one-half times regular rate of pay

• After 40 hours of work in a work week

Payment of Wages

• Due on regular pay date for the

pay period covered

• Certain deductions are ineligible:

• When below minimum rate

required

• Creates reduction of overtime

pay

FLSA Does Not Regulate

• Vacation, holiday, severance or sick pay

• Meal or rest periods, holidays off, or

vacations

• Premium pay for weekend or holiday work

• Pay raises or fringe benefits

• Discharge notices, reasons for discharge

• Immediate payment of final wages

Who is Covered Under the FLSA?

All employees of certain enterprises having

workers engaged in interstate commerce,

producing goods for interstate commerce

or handling, selling, or otherwise working on

good or materials having been moved in or

produced for commerce.

The Details

• Tipped employees

• Employer-furnished facilities

• Industrial homework

• Subminimum wage provisions

• Youth minimum wage

Definition of Tipped Employees

• Individuals receiving more

than $30 a month in tips

• Employer may include tips as

part of the wages

• Must pay at least $2.13 per

hour in direct wages

What are Employer-Furnished Facilities?

• Reasonable cost or fair value:

• Board

• Lodging

• Other facilities

What is Industrial Homework?

Performance of certain work prohibited in

employee’s home unless employer obtains

certification from the Department of Labor

(DOL).

• Types of work include: • Manufacture of knitted outerwear, gloves

and mittens, buttons and buckles,

handkerchiefs, embroideries, and jewelry

• Manufacture of women’s apparel • Enforced by Wage and Hour Division of the DOL

Subminimum Wage Provisions

Employment of certain individuals at

wages below statutory minimum.

• Student learners

• Full-time students in retail or service

establishments, agriculture or higher

learning institutions

• Physical or mental disability limitations

Youth Minimum Wage

• $4.25 per hour – employees under

20 years of age during first 90

consecutive calendar days of

employment

• Restrictions apply for

displacement of workers at higher

wages

Exemptions

3 types:

• Exemptions from both minimum

wage and overtime pay

• Exemptions from overtime pay

only

• Partial exemptions from overtime

pay

Exemptions from Minimum & Overtime Pay • Executive, administrative, professional,

outside sales and certain computer-related

occupations

• Certain seasonal amusement or

recreational establishments

• Certain small newspapers, seaman

employed on foreign vessels, engaged in

fishing operations and newspaper delivery

• Certain farmworkers

• Casual babysitters and elderly companions

Exemptions from Overtime Pay Only

• Certain commissioned employees of retail or

service establishments (i.e., auto, truck, trailer,

farm implement, boat or aircraft sales)

• Parts clerks and mechanics servicing autos,

trucks, or farm implements

• Railroads, air carriers, taxi drivers, motor carriers,

seamen on American vessels, and local delivery

workers

• Announcers, news editors and chief engineers

• Domestic service workers

• Motion picture theaters

• Farmworkers

Partial Exemptions from Overtime Pay

• Certain operations on agricultural

commodities

• Certain bulk petroleum distributors

• Hospitals and residential care

establishments – 14 day work period

alternative

• Minimum education requirements –

remedial training

• Public agency police and fire departments

– special work week requirements

Other Important Components of the FLSA

• Youth employment provisions

• Nonagricultural jobs (youth

employment)

• Farm jobs (youth employment)

• Recordkeeping

Computing Overtime Pay

Overtime must be paid at a rate of at least

1 ½ times the employee’s regular rate of

pay for each hour worked in a workweek in

excess of the maximum allowable in a

given type of employment. Generally, most

employers determine overtime based on a

40 hour workweek.

Rates of Pay

• Hourly Rate – regular rate of pay paid

by the hour

• Piece Rate – regular rate of pay for an

employee paid on a piecework basis

• Salary – salary is the regular rate for an

employee paid a salary for a regular

or specified number of hours in a

workweek.

The Salary Basis Test

Employee must be paid on a salary basis in

order for an employer to claim a white collar

exemption from minimum wage and overtime

for an employee:

• Employee regularly receives a pre-

determined amount of money each pay

period on a weekly or less frequent basis

• Pre-determined amount cannot be

reduced due to variations

Effective Date

Department of Labor’s Final Rule

released on May 18, 2016

Effective Date – December 1, 2016

Final Rules Addressed the Following:

• Annual salary threshold for exempt

positions

• No changes to the duties test

• High compensated employees (HCEs)

• Nondiscretionary bonuses, incentive

payments, and commissions

• December 1, 2016 – new rules take effect!

Annual Threshold for Exempt Positions

• Increased from $23,660 to $47,476

• From $455 to $913 per week

• DOL updates via federal register

every 3 years (or at least 150 days

before updated amounts take

effect) – beginning on January 1,

2020

Year Minimum Salary Level HCE Level

2017 $47,476 134,004

2020 $51,168 147,524

2023 $55,148 162,409

2026 $59,437 178,795

2029 64,060 196,835

2032 $69,042 216,694

2035 $74,411 238,558

Estimated Automatic Increase Projections

*Projections based on DOL’s estimated increases from 2017 to 2020

No Changes to the Duties Test Used to Determine Exemption Status

To qualify for white collar exemptions,

employees must meet certain tests regarding

job duties. The same categories apply:

• Executive

• Administrative

• Professional

• Outside Sales

• Computer Employees

HCE Annual Salary Threshold

• HCA Annual Salary Threshold raised from $100,000

to $134,004

• Employees with primary duty of office or non-

manual work who meet the HCE compensation

requirements are exempt if the employees

customarily and regularly performs at least one of

the exempt duties of a bona fide executive,

administrative, or professional employee.

• Employees performing those exempt duties on an

isolated or occasional basis will not concur the

minimal duties requirements.

Nondiscretionary Bonuses, Incentive Payments & Commissions

• May use nondiscretionary bonuses and incentive

payments (including commissions) to satisfy up to

10% of the standard salary level

• Must be paid on a quarterly or more frequent basis

• Considered compensation promised to induce more

efficient work or remain with the company

• “Catch-up payments” allowed to avoid loss of

exemption status

Recommended Next Steps for Employers:

• Step 1 – Apply the salary basis test to

your workforce

• Step 2 – Determine which exemption

applies to each employee

• Step 3 – Conduct job analysis

Other Considerations

• Review state wage/hour laws

• Capture payroll costs and budgetary

needs

• HRIS/payroll system updates

• Collective bargaining agreements

How old is the FLSA?

A. 56

B. 78

C. 76

D. None of the above

FLSA requires that records must be kept at a place of employment or the business’ central record keeping office. Wage computation records are required to be kept for ___ years and payroll records including collective bargaining agreements and sales purchase records must be kept for ___years.

A. 3 years, 4 years

B. 2 years, 2 years

C. 2 years, 3 years

D. None of the above

The FLSA includes a Statute of Limitations for filing of non-willful and willful violations. The statute for non-will violations is ___ years and the statute for willful violations is ___ years.

A. 2 years, 2 years

B. 2 years, 3 years

C. 3 years, 4 years

D. None of the above

The Final Rule sets the standard salary level at the 40th percentile of earnings for full-time salaried workers in the lowest-wage Census Region; currently the Southern Region. Effective December 1, 2016, the level will increase to $913 per week or $47,476 annually for a full-year of work. How often will the DOL increase the salary level?

A. Every 3 years

B. Every 2 years

C. Every 4 years

D. The salary level won’t be adjusted

The U.S. Department of Labor estimates that a large percentage of employers are not in full compliance with the FLSA. Non-compliance can result in heavy fines, lawsuits, and even criminal charges. Companies that contract with the government can be debarred from government contracts for up to three years. What percentage of employers does the DOL estimate are not in full compliance?

A. 10%

B. 25%

C. 50%

D. 70%

In Summary…

If you have any further questions about the information discussed in this

webinar please feel free to contact us at:

Crawford Advisors, LLC

• HQ: 200 International Circle | Suite 4500 | Hunt Valley, MD 21031

• 1813 Sweetbay Drive | Suite 10 | Salisbury, MD 21804

• 201 King of Prussia Road | Suite 650 | Radnor, PA 19087

• 280 Granite Run Drive | Suite 250 | Lancaster, PA 17601

• 2975 W. Executive Parkway | Lehi, UT 84043

(800) 451-8519 | www.crawfordadvisors.com

HRtactix – (443) 212-1630 | info@hrtactix.com

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Questions…