05/24/2016

By: Kathryn Carlson, Vice President, HR Management Products at KPA, LLC

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The most significant change to wage-and-hour law in more than a decade was published today. This change means that 4.2 million salaried, non-manufacturing workers nationwide will now be entitled to overtime, with a direct cost to employers of almost $1.5 billion in increased employee earnings. Like most changes there are positive and negative aspects and some uncertainty on what it all means. What is certain is that this new rule will impact every employer and KPA is poised to help with employee communications programs and easy-to-use tools that determine exempt vs. non-exempt status.

The immediate impact is that employers in every state will be required to review the exempt status of all employees. For some employers the new regulations could mean that many employees will immediately attain non-exempt status on December 1, 2016, the effective date of the change. However, employers shouldn’t panic. KPA will be providing clients with a simple tool to quickly and effectively determine exempt or non-exempt status. Important points to consider include:

1) The weekly salary level used to determine exempt status vs. non-exempt status has increased from $455 to $913 per week. The DOL’s new regulations have increased the FLSA’s salary basis test to an amount greater than the level seen in California, which is currently the nation’s highest at $41,600 per year. It is possible that certain states, including California, may attempt to provide even broader and greater protections than those afforded by the DOL’s new regulations. More changes are expected and employers will need to stay informed even though the changes are not effective until December 1, 2016.

2) For KPA clients (and other employers) the inclusion of non-discretionary bonuses and incentive payments (including commissions) can be used to satisfy up to 10 percent of the salary basis requirement. Such payments may include non-discretionary incentive bonuses tied to productivity and profitability. However, such payments must be made on a quarterly or more frequent basis in order to satisfy up to 10 percent of the now required $913 per week ($47,476 per year) threshold.
3) There is no change to the existing duties test, so that part of the earlier guideline remains the same.

4) All employers will need a plan to audit their workforces and determine which employees must be reclassified, whether timekeeping programs need to be expanded to track time worked, and additional compensation methods required for compliance
5) The path employers choose to gain compliance while minimizing the negative effects to the bottom line will be critical.

To learn more about the DOL’s new regulations, including how to comply with the Final Rule while minimizing the impact upon your payroll and workforce, please contact us at (866) 356-1735 or [email protected].

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I would recommend watching the complete KPA May 25 Webinar by Kathryn Carlson, Vice President, HR Management Products at KPA, LLC  when you have an hour; please note there are a few seconds of no sound a couple times during this presentation, but it does pick back up and you don’t miss anything. Please note, this is not legal guidance and you will need to verify their duties with a labor attorney; however, the webinar does outline exempt status examples of dealer specific job titles during the presentation. However, as stated previously the duties test is more important, so it may or may not apply for the store/person.

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As discussed, this is the information that I was able to gather for the dealer to go over with their CPA/labor attorney. In his stores’ case, the service techs, advisors, and parts counter employees were already correctly labeled exempt based on the current FLSA rules/definitions. These overtime exemptions will still be valid/not changed after the new rules go into affect.

I found the following resources that may or may not be helpful for you to forward to get a professional opinion to review/comment on what the following means:

It is important to note the specific automobile exemptions of FLSA overtime is in Section 13(b)(10): Salesmen, partsmen, or mechanics.  (Note the site I linked to should not be used to quote federal code – just FYI).

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From the US Department of Labor:

This obviously hasn’t been updated yet, but this is generally the “white collar exemptions”:
 
For the FLSA section 13(a)(1) exemptions to apply, an employee generally must be paid on a salary basis of no less than $455 per week and perform certain types of work that:
  • is directly related to the management of his or her employer’s business, or
  • is directly related to the general business operations of his or her employer or the employer’s clients, or
  • requires specialized academic training for entry into a professional field, or
  • is in the computer field, or
  • is making sales away from his or her employer’s place of business, or
  • is in a recognized field of artistic or creative endeavor.
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Q. How does this ruling affect agricultural workers?
A. The Department’s rulemaking addressed the regulations governing the “white collar” exemptions under Section 13(a)(1) of the FLSA – exemptions for executive, administrative, and professional employees, as well as outside sales employees and employees with certain computer-related job duties. Thus, unless an agricultural worker currently qualifies for one of these “white collar” exemptions, they will not be directly affected by the Department’s Final Rule. The FLSA’s exemptions governing agricultural workers have not been changed by this Final Rule.
Q. Has there been any change to the exemption for commissioned employees working at a retail establishment? Our understanding is that these employees are exempt so long as at least 50% of their gross earnings are from commissions. Has that changed?
A. No, Section 7(i) of the FLSA remains unchanged by the issuance of the new Overtime Final Rule related to commissioned employees. See Fact Sheet #20: Employees Paid Commissions By Retail Establishments Who Are Exempt Under 7(i) from Overtime Under the FLSA. https://www.dol.gov/whd/regs/compliance/whdfs20.pdf
Q. Straight Commission Employees: How do we handle outside sales staff who are paid straight commissions?
A. Consistent with the current regulations, neither the old or new salary requirements will apply to the outside sales employee exemption. For additional information, please See Fact Sheet #17F: Exemption for Outside Sales Employees Under the Fair Labor Standards Act (FLSA).
Q. How should warehouse workers who move product onto a truck and occasionally drive the truck to various locations be classified? Do they fit under the Fact Sheet #19 Motor Carrier exemption?
A. The Section 13(b)(1) overtime exemption does not apply to employees who are not engaged in “safety affecting activities”, such as dispatchers, office personnel, those who unload vehicles, or those who load but are not responsible for the proper loading of the vehicle. Only drivers, drivers’ helpers, loaders who are responsible for proper loading, and mechanics working directly on motor vehicles that are to be used in transportation of passengers or property in interstate commerce can be exempt from the overtime provisions of the FLSA under Section 13(b)(1). See https://www.dol.gov/whd/regs/compliance/whdfs19.pdf. For further information, please see:https://www.dol.gov/whd/FieldBulletins/FAB2010_2.pdf.

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