1. Will We Ever Get New FLSA Regulations? Preparing for Changes in 2016
Presented by:
Margaret R. Kurlinski
Godfrey & Kahn, S.C.

2. It’s Been A Long Road
On March 14, 2014, President Obama issued a memorandum directing Secretary of Labor Thomas E. Perez to “modernize and streamline” the Department of Labor’s (“DOL”) white collar exemptions.
DOL held listening sessions on the following topics:
What is the appropriate salary level for exemption?
What, if any, changes should be made to the duties tests?
How can the regulations be simplified?
DOL published proposed rule on July 6, 2015 and opened rule for comment.
Revisions likely to go into effect late summer/early fall 2016.
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3. Goals Review current minimum wage and overtime law.
Overview of proposed and anticipated changes.
Provide guidance to avoid common wage and hour pit-falls.
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4. Overview of Current Minimum Wage And Overtime Laws
Recap
Overview of Current Minimum Wage And Overtime Laws
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5. Bare Minimum
Federal and state wage and hour laws regulate payment of minimum wage and overtime.
Minimum wage under federal and Wisconsin law is $7.25 an hour.*
Employees must be paid 1.5 times their “regular rate of pay” for every hour worked over 40 in a workweek, unless an employee meets requirements for exemption to apply.
Important to note that this presentation will focus on Fair Labor Standards Act, however, state laws will have a significant impact on how the changes play out. Notably, municipalities and states may have own laws regarding exemptions from overtime and minimum wage, and different minimum wage rate may apply.
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6. Overtime Exemptions
Certain positions are exempt from the overtime laws, including:
Commissioned sales employees.
Computer professionals.
Seasonal and recreational establishments.
“White collar” employees.
White Collar Exemptions a
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7. White Collar Exemptions
Salary Exempt
Must satisfy 2 part test:
Salary Basis Test; and
Duties Test.
If fail to satisfy either test, employee is non-exempt.
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8. Salary Basis Test Today
Employee must be paid on a salary basis.
Must be paid at least $455 per week (or $23,660 per year).
Cannot reduce salary due to lack of work or failure to work 40 hours or more a week.*
Exception for full day absences for personal reasons pursuant to bonafide plan
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9. Duties Test
Review primary duties test.
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10. Duties Test (cont.) Executive. Administrative. Professional.
Highly Compensated.
Executive
Management: must manage a “customarily recognized department or subdivision, which must have a permanent status and function.”
Supervision: must “customarily and regularly” direct the work of two (2) or more other employees, or the equivalent of two (2) employees.
Authority: must have the authority to hire or fire other employees or suggestions/recommendations must be given “particular weight.”
Administrative
Primary duty must be “directly related to management or general business operations.”
Primary duty must include the exercise of discretion and independent judgment as to “matters of significance.”
Professional
“Learned Professional” exemption: primary duty must be the performance of work requiring advanced knowledge in a field of science or learning, which is customarily acquired by a prolonged course of specialized intellectual instruction.
“Creative Professional” exemption: primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.
Highly Compensated
Must be paid total annual compensation of $100,000 or more on a salary basis.
Must customarily and regularly perform at least one of the exempt duties of an exempt administrative, executive or professional employee; however that duty need not be the employee’s “primary” duty in order to qualify for the exemption.
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11. Summer Of 2016
Changes On the horizon
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12. What’s On The Table? Proposed Rulemaking invited comments about:
Raising the minimum salary level for exempt, white collar employees.
Whether to include nondiscretionary bonuses in the employee’s salary for purposes of satisfying the salary basis test.
Modifying the duties tests.
Mixed Reactions.
Reactions to the proposed regulations have been mixed. For example, workers’ rights organizations generally have supported the proposed rules. The AFL-CIO asserts that the proposed regulations would adjust existing protections of the FLSA for inflation, and the Center for American Progress asserts that the proposed regulations would strengthen the middle class, drive economic growth, and help Millennials attain financial stability.[i] On the other hand, many business organizations argue that the proposed regulations will hinder industry and job growth.  The United States Chamber of Commerce states that the proposed regulations would “negatively impact small businesses and drastically limit employment opportunities.[ii] The National Retail Federation likewise opposes the proposed regulations, arguing that they would undermine customer service and harm job creation.[ - See more at:
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13. Release Date TBD
Originally anticipated that rules would be finalized early 2016.
DOL announced that summer 2016 timeframe more likely.
Could be early fall.
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14. How Will the regulations change?
Salary Increases & More
How Will the regulations change?
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15. It’s Going To Cost You … More
Increase standard salary level to 40th percentile of earnings for full-time salaried workers.
Revised regulations would double current salary requirement – increase to approximately $970 per week ($50,440 per year).
Likely will raise highly compensated employee salary to $122,148.
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16. Automatic Updates
Annually adjust minimum salary level for white collar exemptions to account for cost of living increases.
Fixed percentile of wages v. Consumer Price Index.
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17. You Are Not Alone
New requirement higher than even the most generous state law.
Salary increase likely to impact more than 8% of the total U.S. workforce, approximately 13.4 million individuals.
White House estimates will impact 80,000 workers in Wisconsin.
Greatest impact on millennials.
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18. Can The Bonus Get You There?
Currently, nondiscretionary bonuses are included only when determining if an employee receives minimum salary under the highly compensated employee exemption.
DOL asserted it will strictly limit when nondiscretionary bonuses may be used to satisfy salary test for white collar exemptions.
DOL may cap bonus contributions towards satisfying the salary basis test.
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19. Different Duties No specific proposals for changes to duties test.
Requested suggestions for additional occupation examples and comments on current requirements.
DOL accepted public comments on whether test should be changed.
May replace “primary duty” test with quantified percentage.
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20. Can They Do That?
Speculation duties test may be redefined to benefit employees.
Rule-making process and limitations.
Forecast.
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21. Preparing For The Inevitable.
Identify salaried positions that will fall within the new salary gap ($455 week - $970 week).
Are employees at the high end truly exempt? If so, is it worthwhile to increase salary to avoid overtime?
Employees at the low end: can you afford to increase? If not, need to convert to non-exempt.
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22. While You Are At It …
Evaluate all positions to determine if in compliance with the existing duties test.
Run evaluation under the cover of attorney-client privilege.
Examine position, duties and hours.
Does the employee satisfy the 80% test?
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23. Preparing For The Inevitable
Prepare to update exempt employee salary annually.
Update position descriptions to reflect changes.
Prepare to communicate and implement changes to job duties, if necessary.
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24. My employee is no longer exempt.
Now What?
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25. Pay Day Hourly v. flat rate salary. Regular rate of pay.
Fluctuating workweek.
Limit hours and create scheduled workday.
Make sure policies up to date – require approval for overtime work.
‘ Ees prefer salary even when paid hourly, works in their favor, if move from salary to hourly will cause upheval’morale, make sense to do salary nonexempt ‘ what do you need to worry about
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26. The Technology Trap
Exempt employees typically work remotely using electronic devices.
Significant concerns about newly non-exempt employees working “off the clock.”
DOL announced it would seek input from employers regarding non-exempt employees’ use of technology outside of regular schedule.
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27. Allen v. City of Chicago
First court case to consider whether employees entitled to compensation for checking s on mobile devices.
2 prong test:
Did employee perform compensable work?
Did the employer have actual or constructive knowledge work performed without compensation?
Work must be essential, not incidental, to employee’s position and employer must know or have reason to know employees performed work without pay.
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28. Unplug Update policies:
Include limitations on use of electronic devices outside of regular schedule.
Require reporting of all hours worked in timekeeping policy.
Monitor employee access to , remote and phone systems.
Prohibit exempt employees from contacting non-exempt employees outside of their regular work schedule.
For example, if using outlook, can delay delivery until first thing next morning.
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29. Additional Considerations
Travel Time – Federal v. Wisconsin.
On-Call Time.
Recordkeeping requirements.
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30. Bonus Payments Discretionary v. Non-discretionary.
Non-discretionary bonuses paid to non-exempt employees must be included in employee’s regular rate when calculating overtime compensation.
Annual bonus paid at end of year must be factored into past wages.
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31. Joint Employer Liability
When Two Become One
Joint Employer Liability
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32. DOL Targets Joint Employers
On January 20, 2016, David Weil, Wage and Hour Division Administrator, issued an Administrator’s Interpretation and affirmatively communicated that the DOL will aggressively pursue “joint employers.”
Joint employment exists when an employee is “employed by two (or more) employers and the employers are responsible, both individually and jointly, for that employee under the law.”
Administrator distinguished between vertical and horizontal joint employment.
Under both the FLSA and MSPA, an employer is “any person acting directly or indirectly in the interest of an employer in relation to an employee.” “Employment” is broadly defined as “to suffer or permit to work.” Based on these broad definitions, the Department asserted that the scope of joint employment should likewise be as broad as possible.
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33. Who’s The Boss? Vertical Employment Factors:
The entity’s ability to direct, control, or supervise the work performed;
The entity’s control of employment conditions;
The permanency and duration of relationship between the worker and the entity;
Whether the individual’s work for the entity is repetitive and routine;
Whether the individual’s work is integral to the business of the entity;
Whether the individual’s work is performed on the entity’s premises; and
Whether the entity performs administrative functions commonly performed by employers.
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34. Who’s The Boss? (cont.) Horizontal Employment Factors
Who owns the potential joint employers (i.e., does one employer own part or all of the other or do they have any common owners);
Do the potential joint employers have any overlapping officers, directors, executives, or managers;
Do the potential joint employers share control over operations (e.g., hiring, firing, payroll, advertising, overhead costs);
Are the potential joint employers’ operations inter-mingled (for example, is there one administrative operation for both employers, or does the same person schedule and pay workers regardless of which employer they work for);
Does one potential joint employer supervise the work of the other;
Do the potential joint employers share supervisory authority for the worker;
Do the potential joint employers treat the workers as a pool of workers available to both of them;
Do the potential joint employers share clients or customers; and
Are there any agreements between the potential joint employers?
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35. Recent Cases
J&J Snack Foods pays $2.1 million to 677 temporary employees for back wages.
DirectTV to pay $395,000 to subcontractor’s employees for minimum wage and overtime violations.
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36. Deep Pockets
DOL interested in expanding pool of potentially liable entities to increase likelihood of recovery.
DOL will likely attempt to hold employers who rely on contingent workforces or whose operations overlap with another business liable for failure to pay wages and overtime compensation.
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37. The Buck Stops Here
DOL is aggressively pursuing enforcement of wage and hour laws.
Impact on employers and employees will be significant.
Seek guidance and assistance to ensure compliance.
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38. Contact Information
Margaret R. Kurlinski Labor & Employment Godfrey & Kahn, S.C. – Milwaukee 780 North Water Street Milwaukee, WI Phone: (414) Fax: (414)
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