In 2015, the Department of Labor announced a proposed change to overtime regulations that will limit the number of white collar workers who will qualify for exemption from the overtime requirement. Although the implementation of the regulations has been postponed until 2016 or 2017, businesses should begin to consider how the regulations will impact their pay practices. We will discuss basic concepts of overtime and exemptions, with a focus on the anticipated changes.
Presenter: ANDREA E. ZOIA is an associate with the firm Morgan, Brown & Joy LLP. Ms. Zoia represents employers in a variety of labor and employment matters. Her litigation experience includes defending employers in a wide range of workplace claims including employment discrimination, retaliation, wrongful discharge, breach of contract, and wage and hour class actions. Ms. Zoia is a graduate of Boston College and Northeastern University School of Law. She is a member of the Labor and Employment Section of the Boston Bar Association.
Below, please find the link to Morgan Brown and Joy’s website with the seminar materials.
Link to the Department of Labor’s guidance on the new regulations. Note that this has its limitations and only addresses application of federal law (and not the Massachusetts overtime requirements):
Article about the topic:
The Federal Fair Labor Standards Act (FLSA) requires that Non-Exempt employees be paid at an overtime rate for worked performed in excess of 40 hours per week. States also have their own standards, but they must comply at a minimum with the Federal Standards. Massachusetts standards use the FLSA provisions. The FSLA provides an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, and professional employees (white collar employees). To qualify for the exemption, a white collar employee generally must:
1. Be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the salary basis test);
2. Be paid a minimum specified salary (the salary level test); and
3. Primarily perform executive, administrative, or professional duties, as defined in the federal regulations (the duties test).
Highly-compensated employees (HCEs) who are paid total annual compensation of a minimum specified amount and meet certain other conditions are also deemed exempt from the FLSA minimum wage and overtime pay requirements.
Job titles never determine exempt status. Receiving a particular salary, alone, does not indicate that an employee is exempt. Rather, in order for a white collar exemption to apply, an employee’s specific job duties and earnings must meet all of the applicable requirements provided in the regulations. Keep in mind that when both the FLSA and a state law apply, the employee is entitled to the most favorable provisions of each law.
In 2015, the Department of Labor announced a proposed change to overtime regulations that will limit the number of white collar workers who will qualify for exemption from the overtime requirement. Although the implementation of the regulations has been postponed until 2016 or 2017, businesses should begin to consider how the regulations will impact their pay practices. Andrea discussed basic concepts of overtime and exemptions, with a focus on the anticipated changes.
Andrea recommended that employers start off by assuming that all employees are non-exempt and if you have a policy that states that employees are not to work over 40 hours per week, then make it clear, and stick to it. If nonexempt employees do work over 40, even though you have a policy, you have to pay them OT. Under the new regulations which take effect on December 1, 2016, there are still “White Collar” exemptions from the OT provisions of the FLSA. The three categories of “white collar” exemptions are: executive employees, administrative employees, and professional employees. Executive employees must be paid on a salary basis and their primary duties must be managing the company or a segment of it, directing the work of at least 2 other full time employees and must have authority over those employees. Administrative employees also must be paid on a salary or fee basis and their primary duty must be the performance of office or non-manual work related to management and must be able to exercise discretion and independent judgment in regard to matters of significance. Professional employees must be paid on a salary or fee basis and must perform work that requires an advanced knowledge or degree in science or leaning or requires specialized skills in a recognized field of artistic or creative work. The “duties test’ for determining if a certain employee is exempt or non-exempt will not change under the new regulations. The change is, under the old rules, to be exempt, you had to meet the duties test, be paid a guaranteed amount (salary or fee) and make at least $455 per week or more to be EXEMPT. Under the new regulations, you have to meets the duties test, make a guaranteed salary or fee, If you do not meet this salary level, then you are non-exempt and are subject to the Overtime provisions of the FLSA. Adjustment to the salary limited will occur again on January 1, 2020, and then automatically every 3 years.
Andrea mentioned that determination of exemption under the “duties test” is where most of the litigation takes place. She also highly recommended that we have all employees fill out timesheet, so there is documentation of hours worked in case litigation does occur. Penalties for violating the FMLA are severe and the statute of limitations for violations is 3 years.