PRESENTED BY DONNA GABEL HUMAN RESOURCES MANAGER ALEXANDER CITY HOUSING AUTHORITY Human Resources FLSA Update: White-Collar Exemption Requirements

Disclaimer This presentation, related documents, contents, and comments are for informational purposes only and should not be construed as official interpretation of any laws, regulations, requirements, or compliance; or legal advice or legal opinion. You are urged to consult related government agencies or your attorney concerning your own situation and any specific legal questions you have may have. Donna Gabel is a Human Resources Manager with the Alexander City Housing Authority.

Definition Public Employer – FLSA  29 CFR §553.1 – “Public Agency means a State, a political subdivision of a State or an interstate governmental agency”  29 CFR §553.3 – In 1974 definitions were extended to include virtually all of the remaining state and local government employees not covered as a result of the 1966 and 1972 legislation (some exclusions provided).

ALABAMA DOES NOT HAVE SEPARATE WAGE LAWS – WE FOLLOW FEDERAL WAGE LAWS FLSA – Fair Labor Standards Act

The FLSA provides exemption from minimum wage and O.T. requirements for employees employed in these bona fide positions:  Executive  Administrative  Professional capacity  Outside sales  Certain computer-related positions IMPORTANT NOTE:  Job titles alone do not establish exempt status  Nor method of pay, such as salaried, or an employment contract FLSA Exemption

Exempt Employees Hired to do a job – not for the quality or quantity of work, or # of hours worked Must be paid a “guaranteed minimum” on a salary or fee basis without regard to # hours worked Currently, must be paid not less than $455/wk; $910/bi-wkly; $ semi-mthly; $1, mthly (new regulations coming soon)

Exempt Employees Cont’d. Primary duty - office (not including clerical duties) or non-manual work Work is directly related to management or general business operations of the employer or customers May commit the employer in financial or contractual matters For executive exemption must supervise at least 2 FTEs; not required for administrative exemption Exercises discretion and independent judgment related to matters of significance

Proposed Regulations – Exempt Employees New Regulations will:  Raise the salary threshold to equal the 40 th percentile of weekly earnings for full-time salaried workers.  Projected salary threshold level of $970/wk ($50,440 annually) *113.19% increase over the current $455/wk.; $23,660/yr.  Require annual updating of the salary threshold using the 40 th percentile of weekly earnings as stated above based on inflation or wage growth over time.

Proposed Regulations – Exempt Employees Cont’d. New Regulations may also:  Modify the current duties test to qualify for the exemption  Include nondiscretionary bonuses to satisfy a portion of the salary requirement. 3/15/16 - Proposed final revisions delivered to the OIRA (Office of Information & Regulatory Affairs) of the OMB (Office of Management and Budget) OIRA review required by E.O and is typically the final stage before publication OIRA review generally takes 30 days, but can be extended

Proposed Regulations – Exempt Employees Cont’d. 3/17/16 – U.S. Lawmakers introduced legislation to block the proposed regulations Odds of the legislation becoming law – slim to none Regulation effective date – at least 60 days after publication DOL slated publication date – July 2016 Could come as early as April or May

Exempt Salary Restrictions Must be regularly compensated a predetermined amount each pay period The predetermined amount may NOT be subject to reduction due to variations in quality or quantity of work performed Except for 7 exceptions specifically cited in the regulations [29 CFR § (b)(1) thru (7)], MUST receive full salary for any week the employee did any work, regardless of # of days or hours worked – the “No Docking” Rule.

Exempt Salary Restrictions Cont’d. Deductions may NOT be made due to lack of work, absences caused by the employer, etc. when the employee is ready, willing, and able to work. Need not be paid for any workweek in which they perform no work (and, I mean NO work). If a bona fide leave plan has been adopted, employers may require use of leave for absences without affecting the salary basis, as long as the employee receives the guaranteed salary.

Exempt Salary Restrictions Cont’d. Certain deductions may be taken only for one or more full days of absence Deductions for partial-day absences violate the salary basis rule, generally, except:  Those occurring in the first and final weeks of employment  Unpaid leave taken under FMLA A deduction from pay as a penalty for violations of major safety rules under 29 CFR § (b)(4) may be made in any amount.

Exempt Salary Restrictions Cont’d. Payroll practices that don’t violate the salary basis rule:  Taking deductions from an exempt employee’s accrued leave accounts (regardless of whether to cover partial- or full-day absences)  Requiring exempt employees to keep track of and/or record their hours worked  Requiring exempt employees to work a specified schedule of hours  Implementing bona fide, across-the-board changes in work schedules.

Effect of Improper Deductions Lose the FLSA exemption - 29 CFR § (a), (b)  Employer demonstrates an “actual practice” of no intention to pay on a salary basis if these factors are present:  Based on # of improper deductions  Time period during which they were made  # and geographic location of employees whose salary was improperly reduced  # and geographic location of managers responsible for taking the improper deductions  Whether the employer has a clearly communicated policy permitting or prohibiting improper deductions.

Effect of Improper Deductions Cont’d.  Exemption status for other employees affected:  For the time period in which improper deductions were made  For employees in the same job classification  Working for the same manager responsible for the deduction  Exemption status for employees in different job classifications or working for different managers do not lose their exempt status.  Isolated or inadvertent (clerical or time-keeping error) improper deductions will not result in loss of the exemption IF the employer reimburses the employee.

Safe Harbor – 29 CFR § (d)  Provides a safe harbor for employers:  Clearly communicates policy prohibiting improper deductions prior to the actual impermissible deduction  Upon hire  In employee handbook  Employer intranet  Includes mechanism to file a complaint  Reimburses affected employees  Makes a good faith commitment to comply in the future  Provide training to managers  Posting a notice  Reprimanding the manager  Providing a telephone complaint line  Regardless of the reason for the improper deduction

Must be paid the minimum salary threshold($455/wk. – soon to be $970/wk.) Primary duty - management of an enterprise or recognized department or subdivision thereof  Recruiting, training, directing work of, performance evaluations, grievances, discipline, budget control, legal compliance, etc. Customarily and regularly directs the work of 2 or more full- time employees or their equivalent (FTEs) Has authority to hire and fire other employees, or whose suggestions and recommendations in change of status of other employees is given particular weight Executive Exemption

Must be paid the minimum salary threshold($455/wk. – soon to be $970/wk.) Primary duty – office or non-manual work directly related to the management or general business operations of the employee or employer’s customers, such as: Finance, accounting, budgeting, auditing Insurance, quality control, purchasing, procurement Personnel management, H.R., benefits, labor relations Computer network, internet & database administration Legal and regulatory compliance Administrative Exemption

Administrative Exemption Cont’d. Exercises discretion and independent judgment with respect to matters of significance.  Comparison and evaluation of possible actions and taking action  Level of importance and consequence of work performed  Authority to formulate, affect interpret, or implement management policies and operating practices  Carries out major assignments in conducting the operations of the business  Work affects business operations to a substantial degree

Administrative Exemption Cont’d. Exercises discretion and independent judgment with respect to matters of significance.  Authority to commit employer in matters having significant financial impact  Provides consultation and advice to management  Involved in strategic planning  Represents the company when handling complaints and grievances  Authority to make independent choice, free from immediate supervision  Does not mean unlimited authority or complete absence of review

Review all exempt positions and job descriptions Determine which positions will require a salary increase to maintain exempt status Evaluate budget impact – remember the threshold will increase each year based on the 40 th percentile of weekly earnings of salaried employees Determine impact on Agency and employees if position is re-classified Now What????

Watch for potential DOL regulatory changes to the duties test – may create the need to revise job descriptions Remember…the FLSA does not require that any of your employees be classified as exempt But, be aware of the potential harm it may cause to employee morale, job satisfaction, flexibility, undermine authority some need to have, and perhaps job performance Now What??? Cont’d

Donna Gabel Human Resources Manager Alexander City Housing Authority 2110 County Road Alexander City, AL (256) ext. 205 (256) Fax Contact Information