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© 2014 Brigham Young University–Idaho 1 © 2008 Brigham Young University–Idaho
© 2014 Brigham Young University–Idaho FAIR LABOR STANDARDS ACT Exemptions and Policy April 2014 2
© 2014 Brigham Young University–Idaho 3 Overview Northwestern University Football Define “Exempt” and “Non-exempt” Exemption Standards for: Executive Administrative Professional Computer-Related Other Current Legal Topics Policy Re: Salary Administration
© 2014 Brigham Young University–Idaho Regional office of the NLRB ruled that scholarship football players are “employees” and can unionize. Why? 1) Perform services for the benefit of the University and receive compensation (scholarship) 2) Subjected to the employer’s control in the performance of their duties as football players 3) Football duties are unrelated to their academic studies unlike graduate assistants whose teaching and research are inextricably tied to their graduate degree requirements. College Athletes Players Association v. Northwestern University
© 2014 Brigham Young University–Idaho 5 Defining Exempt & Non-Exempt Employees Exempt Employees -- Employees who meet one of the FLSA exemption tests and who are paid on a fixed salary basis and not entitled to overtime. Non-Exempt Employees - Employees who do not meet any one of the Fair Labor Standards Act exemption tests and are paid on an hourly basis and covered by wage and hour laws regarding minimum wage, overtime pay, and hours worked.
© 2014 Brigham Young University–Idaho Exempt Administrative Employees 22 days of vacation accrual 12 days of sick leave accrual No overtime Faculty 0 days of vacation accrual 0 days of sick leave accrual No overtime Contract Non-Exempt Staff Employees 12 days of vacation accrual initially; increases every 5 years to 15 days, 18 days and 22 days 12 days of sick leave accrual Overtime if work more than 40 hours within a work week Defining Exempt & Non-Exempt Employees 6 Why the difference in vacation accrual between administrative and staff employees?
© 2014 Brigham Young University–Idaho An Issue of Status? An Indication of One’s Importance? FLSA Designation
© 2014 Brigham Young University–Idaho The BYU–Idaho Job Description Serves Multiple Purposes Job Descriptions
© 2014 Brigham Young University–Idaho 9 FLSA Exemptions Categories of Exemptions: Executive Administrative Professional Computer-Related Outside Sales Highly Compensated Employee DOL Field Operations Handbook
© 2014 Brigham Young University–Idaho 10 Executive Exemption Must be paid at least $455 weekly ($23,660 annually) on a salary basis. Primary duty must consist of managing the company or a customarily recognized department of the company. Customarily and regularly direct the work of two or more full- time employees or equivalents. Has the authority to hire or fire other employees or make recommendations that carry weight on significant employment decisions. Examples: executive officer, controller, vice president, director.
© 2014 Brigham Young University–Idaho 11 Administrative Exemption Must be paid at least $455 weekly ($23,660 annually) on a salary basis. Primary duty consists of performing office or non-manual work directly related to the management or general business operations of the company. Work includes the exercise of discretion and independent judgment with respect to matters of significance. Examples: manager, supervisor, administrator.
© 2014 Brigham Young University–Idaho Management or General Business Operations Tax Finance Accounting Budgeting Auditing Insurance Quality Control Purchasing Procurement Advertising Marketing Research Safety and Health Human Resources Employee Benefits Labor Relations Public and Government Relations Legal and Regulatory Compliance Computer Network, Internet and Database Administration
© 2014 Brigham Young University–Idaho 13 Professional (Learned and Creative) Exemption Learned Professional: Must be paid at least $455 weekly ($23,660 annually) on a salary basis. (Teachers, licensed/certified practitioners of law and medicine, medical interns and residents do not have to be paid on a salary basis) Primary duty consists of the performance of work that requires advanced knowledge (beyond high school) and that is primarily intellectual in character and includes the exercise of discretion and independent judgment.
© 2014 Brigham Young University–Idaho 14 Professional (Learned and Creative) Exemption The advanced knowledge is in a field of science or learning. The advanced knowledge was acquired by a prolonged course of specialized intellectual instruction (appropriate academic degree or combination of degree and experience). Examples: accountant, nurse, engineer.
© 2014 Brigham Young University–Idaho 15 Creative Professional: Must be paid at least $455 weekly ($23,660 annually) on a salary basis. Primary duty consists of the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor as opposed to routine mental, manual, or physical work. Examples: composer, singer, graphic designer. Professional (Learned and Creative) Exemption
© 2014 Brigham Young University–Idaho 16 Computer-Related Exemption Must be paid at least $455 weekly ($23,660 annually OR at least $27.63 per hour. (Does not have to be paid on a salary basis.) Primary duty consists of: The application of system-analyst techniques and procedures, including consulting with users to determine hardware, software, or systems specifications OR…
© 2014 Brigham Young University–Idaho 17 Computer-Related Exemption (cont’d) The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, OR… The design, documentation, testing, creation or modification of computer programs related to machine-operating systems, OR… A combination of these duties which requires the same level of skills. Examples: network analyst, developer, software engineer.
© 2014 Brigham Young University–Idaho An FLSA exemption to overtime and recordkeeping requirements applies if the establishment… A. does not operate for more than 7 months in any calendar year, or B. its average receipts for any six months of such year (not necessarily consecutive) were not more than 33-1/3 per centum of its average receipts for the other six months of such year. Fact Sheet Seasonal and Recreational Establishments
© 2014 Brigham Young University–Idaho Greater job flexibility Easier to manage work schedules Work requires additional / extended work hours Status Responsibilities merit the exemption Job title = “x” Other Common Management Arguments
© 2014 Brigham Young University–Idaho Dual-role Employees
© 2014 Brigham Young University–Idaho President Obama issued an Executive Order and Presidential Memorandum to enforce parts of the act because the House was not expected to vote on it this session. Would require employers to prove that any gender based pay discrepancy is “job-related and consistent with business necessity.” Would restrict flexible employee compensation based on legitimate factors like: 1) Prior experience 2) Education 3) Negotiation by employees Paycheck Fairness Act
© 2014 Brigham Young University–Idaho “Modernize and streamline” the “white collar” overtime exemptions regulations Fact Sheet: “Opportunity for All: Rewarding Hard Work by Strengthening Overtime Protections” Presidential Memorandum
© 2014 Brigham Young University–Idaho Secretary of DOL charged to: 1. Update existing protections in keeping with the intention of the Fair Labor Standards Act. 2. Address the changing nature of the American workplace. 3. Simplify the overtime rules to make them easier for both workers and businesses to understand and apply. Presidential Memorandum
© 2014 Brigham Young University–Idaho Possible Changes Include: Increase Minimum Salary Threshold for FLSA Exemptions $455 per week to $970 per week $23,660 per year to $50,000 per year Change the Primary Duties Test Anticipated Changes to FLSA
© 2014 Brigham Young University–Idaho Time to Update the Law Annual Salary: $24,000 Hours Per WeekHours Per YearHourly Rate 402,080 $11.54 502,600 $9.23 603,120 $7.69 EXAMPLE
© 2014 Brigham Young University–Idaho 1938 – The FLSA Becomes Law 1975 – Minimum Threshold: $250 per week 2004 – Minimum Threshold: $455 per week (the equivalent of $561 in today's dollars) The current rate is “below today’s poverty line for a worker supporting a family of four, and well below 1975 levels in inflation adjusted terms.” Time to Update the Law
© 2014 Brigham Young University–Idaho Supplemental Slides
© 2014 Brigham Young University–Idaho Occupational Index and Exemption Assistance Other FLSA Exemptions
© 2014 Brigham Young University–Idaho 29 Outside Sales Exemption Does NOT have to be paid on a salary basis. Primary duty consists of making sales or obtaining orders for contracts for services or for the use of facilities for which consideration is paid by a client or customer. Customarily and regularly is engaged away from the employer’s place of business. Examples: traveling salespersons, contract negotiators.
© 2014 Brigham Young University–Idaho 30 Highly Compensated Exemption Highly compensated employees performing executive, professional or administrative duties: Must be paid a total compensation of $100,000 or more annually which includes at least $455 per week paid on a salary basis. The $100,000 annually may consist of commissions, nondiscretionary bonuses and other nondiscretionary compensation.
© 2014 Brigham Young University–Idaho 31 Highly Compensated Exemption (cont’d) Customarily and regularly performs at least one of the exempt duties or responsibilities of the Executive, Administrative, or Professional Exemption Primary duty consists of performing office, non-manual work Examples: real estate broker, stock broker.
© 2014 Brigham Young University–Idaho 32 Salary Basis Requirement To be paid on a salary basis means that the employee “regularly receives a predetermined amount constituting all or part of the employee’s salary, which amount is not subject to reduction because of variations in the quality or quantity of work performed.”
© 2014 Brigham Young University–Idaho 33 Salary Basis Requirement (cont’d) In other words, exempt employees must receive their full salary for any week in which they perform any work without regard to the number of days worked or how well the job was performed with the following main exceptions:
© 2014 Brigham Young University–Idaho 34 Salary Basis Requirement (exceptions) Hourly paid computer professional employees who make at least $27.63 per hour, doctors, lawyers, teachers and outside sales employees are exceptions to an exempt white-collar employee being paid on a “salary basis.
© 2014 Brigham Young University–Idaho 35 Specific Prohibited Deductions from Salary Partial day absences (employers may pay for these using paid leave accounts). An exception to this prohibition is when the exempt employee is on FMLA leave. Actual pay deductions may be made for partial day FMLA absences. Jury duty and military leave unless the employee performs no work whatsoever during the employer’s standard workweek. When no work is available such as during slow periods or when the business is closed due to weather emergencies.
© 2014 Brigham Young University–Idaho An employee is not paid on a salary basis if deductions from the predetermined salary are made for absences occasioned by the employer or by the operating requirements of the business If the employee is ready, willing and able to work, deductions may not be made for time when work is not available Deductions from Salary
© 2014 Brigham Young University–Idaho Permitted Salary Deductions Seven exceptions from the “no pay-docking” rule: 1. Absence from work for one or more full days for personal reasons, other than sickness or disability 2. Absence from work for one or more full days due to sickness or disability if deductions made under a bona fide plan, policy or practice of providing wage replacement benefits for these types of absences 3. To offset any amounts received as payment for jury fees, witness fees, or military pay
© 2014 Brigham Young University–Idaho Permitted Salary Deductions Seven exceptions from the “no pay-docking” rule: 4. Penalties imposed in good faith for violating safety rules of “major significance” 5. Unpaid disciplinary suspension of one or more full days imposed in good faith for violations of workplace conduct rules 6. Proportionate part of an employee’s full salary may be paid for time actually worked in the first and last weeks of employment 7. Unpaid leave taken pursuant to the Family and Medical Leave Act
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