EMPLOYEE CLASSIFICATION
& OVERTIME RULES
Healthcare Financial Management Association
Northeastern New York Chapter
Sanjeeve K. DeSoyza, Esq.
April 13, 2016
Proposed Changes
to USDOL Overtime
Regulations
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The Timeline
June 30,
2015
NPRM
March 13,
2014
President’s
Directive to
Update Rule
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Sept. 4, 2015
Comment
Period
Ended
(247,064
comments )
July 6,
2015
Rule
Published
March
2016
Proposed
Rules sent
for OMB
Approval
DOL
Review
June 2016?
Final Rule
Issued
“White-Collar” Exemptions
• Exemptions:
o Executive
o Administrative
o Professional
o Outside Sales
• Three tests:
o Salary Basis
o Salary Level
o Duties
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“White-Collar” Exemptions
• A brief look back:
o Last revised in 2004
o Eliminated long/short duties test
o Increased minimum salary level to $455 per week
o USDOL received over 75,000 comments and spent 13
months reviewing
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Proposed FLSA Regulations
• USDOL issued new “proposed” regulations on
June 30, 2015
• Significant changes to FLSA’s minimum salary
levels
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Proposed Salary Threshold
Increase
• FLSA Minimum Salary Level
o NOW: $455 per week ($23,660 per year)
o PROPOSED: $970 per week ($50,440 per year)
• Compare with New York Labor Law
o NOW: $675 per week ($35,100 per year)
* Remember: There is no New York Labor Law salary
minimum for “professional” employees.
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Highly Compensated Employees
• “Highly Compensated Employee” Threshold
o Now: $100,000 per year
o Proposed: $122,148 per year
• No specific New York Labor Law counterpart
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“Duties” Test
• No changes proposed, but….
• USDOL sought comments about whether
changes are necessary
o What, if any, changes should be made?
o Should employees be required to spend a minimum
amount of time performing work that is their primary
duty? What minimum?
• Looking to follow California’s model?
• What will happen?
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What Could It Mean?
• Potential loss of exemption for front-line
managers, particularly in smaller establishments
• Limits opportunities for exempt employees to
engage in non-exempt work for training purposes
and to assist in “all-hands-on-deck” situations
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Annual Indexing & Automatic Increases
• Automatic annual updating based on either:
o Percentile of earnings (40th percentile of weekly
earnings for full-time salaried workers); or
o Inflation as measured by consumer price index
• Would require employers to perform annual
assessment and adjustment to preserve exempt
status of workers
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Non-discretionary Bonuses
• USDOL sought comments on whether to allow
nondiscretionary bonuses, such as certain
production or performance bonuses, to satisfy a
portion of the standard salary test requirement
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Proactive Risk
Management and
Transition Strategies
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Proactive Risk Management
• Step 1: Self Audit
o Consider benefits of attorney-client privilege
o Consider applicable state laws
o Review salary levels and duties
o Review CBA(s)
o Identify and evaluate part-time “exempt” employees
o Document reclassification decisions
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Proactive Risk Management
• Step 2: Roll-Out Changes
o Determine timing of changes/re-classification
o Develop action plan and employee communications
o Educate supervisors
o Anticipate and be prepared to answer questions and
complaints
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Proactive Risk Management
• Step 3: Training & Compliance
o Recordkeeping
o Meal periods (New York Labor Law)
o Restrictions on working outside of normal work hours
o Overtime restrictions
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Concerns Associated with
Maintaining Exempt Status
• Must satisfy whatever duties test is adopted
o Additional oversight necessary if “percentage-of-timerule” adopted
• Salary must meet applicable new threshold
o Increased costs
o Threshold will escalate year after year
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Concerns Associated with
Maintaining Exempt Status
• Budgeting annual automatic increases and
planning for implementation
o May have very short notice!
• Negative morale:
o On supervisors
o On other employees
o May be required to provide poor performing
employees with raises to preserve exempt status
* Do not forget to issue Wage Theft Protection Act
notices when necessary!
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Concerns Associated with
Reclassification to Non-Exempt
• Setting the “new” pay rate
o Potential for significantly higher costs (overtime) if
standard workweek exceeds 40 hours
• Morale concerns
o Less autonomy and scheduling flexibility for reclassified employees
• Limiting overtime and avoiding off-the-clock
work
o Is this even practicable given the worker’s duties and
responsibilities?
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Transition Considerations
• Convert salary to hourly
• Transition to “fluctuating workweek” salary
• Transition to “salaried non-exempt”
* Do not forget to issue Wage Theft Protection Act
notices when necessary!
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NY Minimum Wage
Increase and
Paid Family Leave
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New Minimum Wage Increases
• Budget deal reached March 31, 2016
• NYC large employers (11 or more employees):
o $11.00 on 12/31/16
o $13.00 on 12/31/17
o $15.00 on 12/31/18
• NYC small employers (10 or fewer employees):
o $10.50 on 12/31/16
o $12.00 on 12/31/17
o $13.50 on 12/31/18
o $15.00 on 12/31/19
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New Minimum Wage Increases
• Employers in Nassau, Suffolk, and Westchester
Counties:
o $10.00 on 12/31/16
o $11.00 on 12/31/17
o $12.00 on 12/31/18
o $13.00 on 12/31/19
o $14.00 on 12/31/20
o $15.00 on 12/31/21
(cont’d)
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New Minimum Wage Increases
• Employers in the remainder of the state:
o $9.70 on 12/31/16
o $10.40 on 12/31/17
o $11.10 on 12/31/18
o $11.80 on 12/31/19
o $12.50 on 12/31/20
− Thereafter, minimum wage will continue to rise toward
$15.00 depending on its economic impact
− Increases could be suspended if they are hurting the
economy
− Assess economy in upstate NY to determine rate of
increase that is best suited to grow the upstate economy
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Paid Family Leave in NY
• Included in March 31, 2016 budget deal
• Effective January 1, 2018
o Eligible after 6 months of employment
o Up to 12 weeks of paid leave (phased in)
o Qualifying reasons:
−Bond with new child (birth, adoption, or foster)
−Care for seriously ill family member
−Address issues arising from a family member’s
military service
o Applies to all employers
o Employee’s job must be held open
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(cont’d)
Paid Family Leave in NY
o Weekly benefit amounts (% of employee’s AWW):
− 1/1/18: 50% (8 weeks)
− 1/1/19: 55% of AWW (10 weeks)
− 1/1/20: 60% of AWW (10 weeks)
− 1/1/21: 67% of AWW (12 weeks)
o Maximum weekly benefit amounts:
− 1/1/18: 50% of SAWW
− 1/1/19: 55% of SAWW
− 1/1/20: 60% of SAWW
− 1/1/21: 67% of SAWW
− **SAWW calculated by NYSDOL ($1,266.44)
(cont’d)
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Paid Family Leave in NY
o Funded entirely by employees:
− $0.70 to $1.40 per week (phased in)
− No employer contribution
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Questions?
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SAVE THE DATE
Workplace 2016
Albany – June 8, 2016
Poughkeepsie – June 14, 2016
Saratoga – June 21, 2016
Visit www.bsk.com for details and to register
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The information in this presentation is intended as
general background information on labor and
employment law. It is not to be considered as legal
advice. Employment law changes often and
information becomes rapidly outdated.
All rights reserved. This presentation may not be
reprinted or duplicated in any form, without the
express written authorization of
Sanjeeve K. DeSoyza, Esq.
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