1. HR IN OVERTIME: Recap of FLSA Rules and Overtime Basics
Webinar Wednesdays
HR IN OVERTIME: Recap of FLSA Rules and Overtime Basics
Trisha Gibo, Esq.
November 2016

2. Definition of “Exempt Employee” Under New Regulations
DISCUSSION TOPICS
Definition of “Exempt Employee” Under New Regulations
Potential Limitations on Changes to FLSA Regulations
Best Practices on Analysis of your Workforce
Prepare for Change to your Workplace
Overtime Calculation
Consequences for Misclassification
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February 18, 2019

3. DEFINITION OF EXEMPT EMPLOYEE
Exempt from minimum wage requirements
Hawaii minimum wage currently: $8.50/hour
Increase to $9.25/hour on January 1, 2017
Exempt from overtime requirements
Exempt status determined by statutory test
Salary Test
Salary Basis
Salary Level
Primary Duties Test
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February 18, 2019

4. DEFINITION OF EXEMPT EMPLOYEE
Salary Test: Salary Basis
Regularly receives a predetermined amount of compensation without regard to quality or quantity of work
Must be paid the full salary for any week in which the employee performs any work
Need not be paid for any workweek when no work is performed
Federal Exemptions: Executives, Administrators, Professionals
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February 18, 2019

5. DEFINITION OF EXEMPT EMPLOYEE
Salary Test: Salary Basis
Special exceptions for certain categories
Computer employees, doctors, lawyers, outside salespersons
Exemptions for highly compensated employees (HCE)
Current HCE total compensation at least $100,000
Effective 12/1/16 - HCE total compensation at least $134,000
Special Regulations: Teachers, creative professionals, specific industries (airlines, motor carrier, automotive sales – check with counsel
HCE: at least std exempt employee weekly salary + additional comp from other sources
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February 18, 2019

6. DEFINITION OF EXEMPT EMPLOYEE
Salary Test: Salary Level
Current regulations
Minimum salary is $455/week ($23,660/year)
Effective 12/1/2016
Minimum salary will be $913/week ($47,476/year)
Applicable Exemptions:
Executives
Administrators
Professionals
Computer Professionals (?)
This change is specific to
executive, administrative, professional exemptions.
May apply to computer professionals – pending legislation to “phase-in”
Not to other exemptions.
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February 18, 2019

7. DEFINITION OF EXEMPT EMPLOYEE
Salary Test: Salary Level
Applicability to Part-Time Employees
New regulations do not allow for proration for part-time employees
Included/Excluded in Salary
Excludes boarding, lodging, or other facilities (i.e. benefits)
May include nondiscretionary bonuses, incentive payments and commissions for up to 10% of the salary requirement if paid quarterly
PART TIME New regulations does not allow for prorating of the salary level requirement for part time employees.
For example, a 0.5 FTE employee does not meet the requirement if they make ½ the 913/week requirement
The employee must make $913/week despite the number of hours worked or scheduled per week
Nondiscretionary = paid automatically upon meeting specific goals; no question whether it will be paid
Examples:
bonuses in employment contract/CBA, bonus tied to performance evaluations, incentive plan bonuses
Service anniversary bonus, attendance bonus, bonus for shift differential, production bonus, retention bonus
EXCLUDE: holiday bonus
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February 18, 2019

8. DEFINITION OF EXEMPT EMPLOYEE
Primary Duties Test
Principle, main, major or most important duty employee performs
Relative importance of duties
Amount of time spent on exempt work
Employee’s relative freedom from direct supervision
Relationship between employee’s salary and wages paid to other employees
Time spent not sole test, although 50% or more of time spent performing exempt work satisfies requirement
Regulations also provide other guidelines
DON’T FORGET!
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February 18, 2019

9. DEFINITION OF EXEMPT EMPLOYEE
Remember:
Salaried employees are not always exempt employees
“Managers” or “supervisors” are not automatically exempt
Only non-exempt employees should to fill out timesheets
Non-exempt employees must make at least minimum wage despite their method of payment (salary, commission, combination, etc. . . )
$8.50/hour
$9.25/hour 1/1/17
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February 18, 2019

10. POTENTIAL LIMITATIONS ON CHANGES
Trump Administration
Not likely to change 12/1/16 effective date
Further changes to regulations require notice-and-comment periods
Potential changes after Trump takes office on 1/20/17
May include small-business exception
May eliminate triennial automatic increases in salary level
Automatic updates begin January 1, 2020
Next increase will be to over $51,000/year
USDOL will post new salary levels 150 days in advance of their effective date, beginning on August 1, 2019
Small Business Exception (Trump brief interview on 8/12/16)
If based on revenue this could help nonprofit organizations
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February 18, 2019

11. POTENTIAL LIMITATIONS ON CHANGES
Lawsuits
Lawsuit filed by 21 states (led by Texas)
Request preliminary injunction to block FLSA overtime rule
Argue that FLSA does not authorize salary-level test or triennial automatic increase in salary threshold
Unconstitutional infringement on state rights
U.S. Chamber of Commerce + 50 business groups
Argue USDOL exceeded authority when passed the rules
Request expedited decision by Texas federal court
Cases consolidated by Federal District Court in Texas
Decision is still pending with court
Decision will not likely be issued before 12/1/16
Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary
February 18, 2019

12. BEST PRACTICES FOR ANALYSIS OF POSITIONS
Identify all exempt employees that make less than $913/week ($47,476/year)
Reassess duties to ensure proper classification as exempt
Determine whether the company will either:
Increase the position’s pay to $913/week
Eliminate exempt level duties
Reclassify as non-exempt & leave duties and salary as-is
Classify all individuals in a position the same
Do not make some employees in a job classification exempt and others non-exempt
Different FLSA status = confusion and likely complaints about misclassification
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February 18, 2019

13. PREPARE FOR CHANGES TO YOUR WORKPLACE
Timesheet and Recordkeeping Training
Adding or eliminating timesheet requirements
Maintaining accurate records for overtime hours worked
Review Overtime Policies
Prior approval from supervisor before working overtime
Disciplinary action for violation of the policy
Anticipate Engagement Issues
Proper communication with employees
Loss in productivity due to “demotion”
Low morale due to decrease in the number of overtime hours
ACCURATE RECORDS Watch out for telecommuting
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February 18, 2019

14. Calculating Overtime Myths Reality
Overtime paid for work in excess of 8 hours per day
Calculated using base hourly wage
Based on work schedules set by company
Reality
Overtime only required after 40 hours in work week
Based on regular rate
Must compensate for all hours worked
Duty hours
Hours controlled
Attendance required
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February 18, 2019

15. CALCULATING OVERTIME Overtime
Employers are required to pay non-exempt employees overtime for all hours worked in excess of forty (40) in the work week
Overtime Rate = 1.5 x Regular Rate
Regular Rate
All compensation in work week ÷ total hours worked in work week
Includes all payments made to or on behalf of the employee
Includes reasonable cost of board, lodging or other facilities (benefits)
Tipped employees – includes amount of tip credit properly claimed by employer
WORK WEEK: should be pre-set by Company –
Under state law 168 hour period during 7 consecutive 24-hour periods
Example: Sunday 12:00am to Saturday at 11:59pm
General std for overtime pay. 29 CFR
Regular rate: 29 CFR
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February 18, 2019

16. CALCULATING OVERTIME Hourly Piece Rate Combo Hourly & Piece Rate
Single Rate
More than one rate: weighted average regular rate
More than one rate: time-and-a-half for specific work
Piece Rate
Time-and-a-half for overtime hours worked
Premium piece rate
Combo Hourly & Piece Rate
Day Rate or Job Rate
Salary
Time-and-a-half for overtime hours worked
Fluctuating work week
Commissions
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February 18, 2019

17. CALCULATING OVERTIME Hourly – Single Rate
Standard time-and-a-half for overtime hours worked
Example:
$10.00/hour
Worked 44 hours in work week
Overtime Rate = 1.5 x Hourly Rate
= 1.5 x $ = $15.00/hour
Total Comp = ($10.00 x 40 hours) + ($15.00 x 4 hours)
= $ $60.00
= $460.00
Hourly rate employee 29 CFR
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February 18, 2019

18. Hourly – More than One Rate in Same Week
CALCULATING OVERTIME
Hourly – More than One Rate in Same Week
Option 1: Weighted Average Regular Rate
Example:
Job A: $10.00/hour and Job B: $15.00/hour
Worked 30 hours in Job A + 20 hours in Job B = 50 hours total
Gross Wages = ($10.00 x 30 hrs) + ($15.00 x 20 hrs) = $600.00
Weighted Average Regular Rate = $ ÷ 50 hours = $12.00/hour
Overtime Rate = 0.5 x $12.00 = $6.00/hour
Total Comp = $ ($6.00 x 10 overtime hours)
= $ $60.00
= $660.00
Employees working at two or more rates: 29 CFR
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February 18, 2019

19. Hourly – More than One Rate in Same Week
CALCULATING OVERTIME
Hourly – More than One Rate in Same Week
Option 2: Time-and-a-half for specific type of work
Example:
Job A: $10.00/hour; Job B: $15.00/hour
Worked 30 hours in Job A + 10 hours in Job B + 10 OT hours in Job B
Overtime Rate = 1.5 x Job B Rate (15.00) = $22.50
Total Comp = ($10.00 x 30 hrs) + ($15.00 x 10 hrs) + ($22.50 x 10 OT hrs)
= $ $ $225.00
= $675.00
Must be done by prior agreement – agree that OT rate will be 1.5 x the hourly rate of the work completing
Employees working at two or more rates: 29 CFR
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February 18, 2019

20. Piece Rate (Option 1 – overtime rate)
CALCULATING OVERTIME
Piece Rate (Option 1 – overtime rate)
Total Earnings + (0.5 x Regular Rate) for all OT hours worked
Example:
Piece Rate = $0.45/piece and produced 100 items that week
Worked 45 hours in work week
Total Weekly Earnings = ($0.45 x 100 items) = $450.00
Regular Rate = Total Weekly Earnings ÷ Total Hours Worked
= $ ÷ 45 hours = $10.00/hour
Overtime Rate = 0.5 x Regular Rate = 0.5 x $10.00 = $5.00/hour
Total Comp = $ ($5.00 x 5 hours)
= $ $25.00
= $475.00
Employee paid based on the number of items manufactured or produced
Pay overtime rate on all hours worked over 40/week
Pieceworker 29 CFR
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February 18, 2019

21. Piece Rate (Option 2 – premium rate)
CALCULATING OVERTIME
Piece Rate (Option 2 – premium rate)
Agree to pay 1.5 x piece rate for each piece produced during overtime hours
Example:
Piece Rate = $ 0.50/piece
Worked 45 hours in work week
400 items produced (first 40 hours) items produced (OT hours)
Overtime Piece Rate = 1.5 x $0.50 = $0.75/piece during overtime hrs
Total Comp = ($0.50 x 400 itms) + ($0.75 x 100 itms)
= $ $75.00
= $275.00
Employee paid based on the number of items manufactured or produced
Make sure that the individual is paid minimum wage
Pieceworker 29 CFR
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February 18, 2019

22. CALCULATING OVERTIME Hourly + Piece Rate
Previous agreement to pay 1.5 time hourly or piece rate for specific type of worked during overtime
Example:
Hourly: $10.00/hr; Piece rate: $0.50/piece; 500 items produced
Worked 30 hrs in hourly job + 10 hrs in piece job + 10 OT hrs in hourly job
Overtime Rate = 1.5 x $10.00 = $15.00/hour
Total Comp = ($10 x 30 hrs) + ($0.50 x 500 itms) + ($15 x 10 OT hrs)
= $ $ $150.00
= $700.00
29 CFR
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February 18, 2019

23. CALCULATING OVERTIME Day Rates or Job Rates
Total Earnings + (0.5 x Regular Rate) for all OT hours worked
Example:
$90/day despite hours worked; 5 days per week
Worked 9 hours per day
Regular Rate = Total Weekly Earnings ÷ Hours Worked
= ($90 x 5 days) ÷ 45 hours = $10.00/hour
Overtime Rate = 0.5 x Regular Rate = 0.5 x $10.00 = $5.00/hour
Total Comp = ($450.00) + ($5.00 x 5 OT hours)
= $ $75
= $525.00
29 CFR
Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary
February 18, 2019

24. CALCULATING OVERTIME Salary (Option 1)
Salary + (1.5 x Regular Rate) for all OT hours worked
Example:
Employee is paid salary of $450 & worked 45 hours/week
Regular Rate = Total Weekly Earnings ÷ Hours Worked
= $ ÷ 45 hours = $10.00/hour
Overtime Rate = 1.5 x Regular Rate
= 1.5 x $10.00 = $15.00/hour
Total Comp = ($450.00) + ($15.00 x 5 OT hours)
= $ $75
= $525.00
Entitled to total compensation + $15/hour for all hours over 40 in a work week
Salaried Employees – general: 29 CFR
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February 18, 2019

25. Salary (Option 2 – fluctuating work week)
CALCULATING OVERTIME
Salary (Option 2 – fluctuating work week)
Total Earnings + (0.5 x Regular Rate) for all OT hours worked
Example
$600/week – no matter the number of hours worked
Worked 50 hours in work week
Regular Rate = $ ÷ 50 hours = $12.00/hour
Overtime Rate = 0.5 x Regular Rate
= 0.5 x $12.00 = $6.00/hour
Total Comp = $ ($6.00 x 10 hours)
= $ $60.00
= $660.00
Must be based on previous agreement with employee
Entitled to $10/hour for all hours up to 40 in a work week + $15/hour for all hours over 40 in a work week
Fixed salary for fluctuating hours 29 CFR
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February 18, 2019

26. CALCULATING OVERTIME Commissions
Total Earnings + (Overtime Rate x OT hours worked)
Example:
Employee is paid salary of $350/week + $200 in commission
Employee works 55 hours in the same work week
Regular Rate = Total Weekly Earnings ÷ Hours Worked
= ($ $200.00) ÷ hours = $10.00/hour
Overtime Rate = 0.5 x Regular Rate = 0.5 x $10.00 = $5.00/hour
Total Comp = ($ $200.00) + ($5.00 x 15 hours)
= $ $75.00
= $625.00
29 CFR
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February 18, 2019

27. CONSEQUENCES FOR MISCLASSIFICATION
Inaccurate Time Records For Non-Exempt Employees:
USDOL will ask employee to “estimate” his/her work hours per week (i.e. overtime)
USDOL will calculate OT based on employee’s “estimated” hours and demand payment
If employer cannot prove otherwise (with valid records), USDOL will find violation
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February 18, 2019

28. CONSEQUENCES FOR MISCLASSIFICATION
Inaccurate Time Records For Exempt Employees:
Typical Situations:
Exempt employees required to clock in on the same system as non-exempt employees so company can monitor attendance
Exempt employees required to clock for purposes of calculating paid leaves
Exempt employees required to use time cards for purposes of calculating bonuses
Exempt employees required to clock in so company can bill customer
Result: Exempt employee is converted to nonexempt and unpaid overtime is now due
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February 18, 2019

29. Carefully review all your positions against the statutory test
FINAL THOUGHTS
Carefully review all your positions against the statutory test
Properly classify your employees under FLSA
Get ready to implement changes effective 12/1/16
Accurately calculate overtime
Keep accurate records in accordance with state and federal law
Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary
February 18, 2019

30. If you have any follow up questions, email us at
ANY QUESTIONS?
If you have any follow up questions, us at
For access to these materials,
Please visit our website for more resources
Copyright 2016 ES&A, Inc. All Rights Reserved Confidential and Proprietary
February 18, 2019