Source: http://www.dvsemploymentlaw.com/department-of-labor-new-exempt-employees-regulations/
Timestamp: 2019-10-22 09:34:05
Document Index: 610497368

Matched Legal Cases: ['§541', '§541', '§541', '§541', '§541', '§541', '§541', '§541', '§541', '§541', '§541', '§541', '§541']

Department of Labor | New Exempt Employees Regulations | Van Suilichem & Assoc., P.C.
(248)-644-2419 dvslawyer@dvsemploymentlaw.com
Detroit Employment & Labor Law Attorney
Van Suilichem & Assoc., P.C.
DEPARTMENT OF LABOR NEW EXEMPT EMPLOYEES REGULATIONS
PREPARED BY: DONALD A. VAN SUILICHEM
dvslawyer@dvsemploymentlaw.com
On Tuesday, November 22, 2016, a Texas federal judge entered a nationwide injunction blocking the U.S. Department of Labor from implementing its new controversial rule that would have expanded overtime protections to a substantial number of employees who were previously exempt from overtime. The court noted that nothing in the FLSA indicates that Congress intended that the DOL defined exemptions with respect to a minimum salary level and, therefore, the new rule was unlawful.
This decision and injunction will, for now, put on hold the implementation of the new salary test on the 1st of December.
So what should you do now? I would advise holding tight on any plans to increase the salary level of current exempt employees who do not meet the $913 threshold. I anticipate the DOL will appeal this ruling to the 5th Circuit Court of Appeals or to the US Supreme Court. An appeal could also seek to temporarily set aside the Texas Judge’s ruling allowing the new rules to go into effect until the Appeals Court has time to review the merits of the lower court’s decision. If you have already raised the salary to the $913 level, you may want to hold tight and let this case play out. As you know employees do not respond favorably to reductions in pay once given.
I OVERVIEW SUMMARY:
The new Exempt Rules take effect December 1, 2016.
The Rules only apply to the Executive, Administrative and Professional employees.
The Rules increase the minimum salary necessary for the exemption to apply from $455 to $913.00 ($47,476 annual salary).
The Highly Compensated Employee Rules (“HCE”) increase the minimal salary from $100,000 per year to $13,004 per year.
For HCE employees, the $134,004 minimum threshold, up to 10% can be made up of non-discretionary bonuses, incentive pay or commissions.
The Rules do not make any changes in the “duties test” that determines whether white collar workers satisfy the exempt status rules.
If the salary test is not met, the employee is not exempt no matter what position he/she holds. The President and CEO of a company is entitled to overtime pay.
II WHAT IS NOT AFFECTED:
Hourly non-exempt employees are not affected by the new Rules. For most employers, this is the bulk of employees.
Outside salespersons are not affected.
III IMPACT OF THE NEW RULES:
For employees who no longer meet the salary threshold, they are entitled to overtime pay for all hour “worked” in excess of 40 in a single workweek. Time off for vacations, holidays, sick days, jury duty, etc., even if fully paid by the employer do not have to count for hours worked. Thus if an employee had Memorial Day off with pay and worked 8 hour days Tuesday, Wednesday, Thursday, Friday and Saturday to catch up on work for a short week, no overtime is owed for the Saturday work because the employee only worked 40 hours in this single workweek.
Employees currently classified as “exempt” who will not meet the income threshold by December 1, 2016, still can remain “salaried” employees, but in computing overtime, the salary will be converted to an hourly rate. It is this hourly rate that now will be used to compute overtime.
If an employee loses his/her exempt status on December 1, 2016 because he/she does not meet the income threshold, the employee will have to keep track of hours worked on a daily basis the same as current hourly employees. [https://www.dol.gov/whd/regs/compliance/whdfs21.pdf].
You will need to advise your payroll company of the change in status to apply to all hours worked. December 1, 2016 falls on a Thursday. So all hours worked during that week, even those hours before the 1st count towards the 40-hour threshold for the week. This would include the start time, time off for lunch, and the end of the workday. The method of recording time is not prescribed by the Regulations as long as it accurately reflects time actually worked.
IV WHAT CAN EMPLOYERS DO TO MINIMIZE EXTRA COMPENSATION FOR OVERTIME?
If an employee’s salary is close to $913 per week, you could increase the salary to put the employee over the threshold. As long as the employee still me the salary threshold, you could avoid overtime. If an employee regularly works in excess of 40 hours in a single workweek, this could be very cost effective to ovoid the high cost of overtime pay. But remember, a salaried employee is entitled to the full salary during the workweek without regard to the number of hours worked with some limited exceptions.
You can limit the number of hours that the employee works. This should be done in writing since it may be difficult for salaried employees to adjust their schedule. You also need to include in the policy, the fact that use of e-mail beyond the employee’s normal business hours counts towards time worked except if de minimus. Reading an e-mail advising that a meeting is called off the next day is probably de minimus. Responding to questions about a report from the manager after hours in all probability would count as hours worked and should be recorded by the employee.
You can convert the salaried employee to hourly status. The employee would only be paid for time worked. If the employee had a doctor’s appointment in the afternoon, the employee would not be paid unless PTO can be applied by the time off.
You can reduce the pay of the employee to approximate the same total pay based on the number of hours regularly worked by the employee. In fact, this is one of the examples given by the Department of Labor to avoid or minimize overtime pay. [https://www.dol.gov/WHD/overtime/final2016/faq.htm#3]. Example, if an employee made $600.00 per week as a salaried exempt employee. The employee regularly works 45 hours per week. You could reduce the hourly rate to $12.75. For 40 hours worked the employee would receive $510.00. the 5 hours’ overtime would be at a rate of $9.125 for an overtime payment of $95.63. The total compensation for the employee doing the same work and in the same work hours would only increase pay for that week to $605.63, or a $5.63 increase in cost to the employer. While the overall pay may be the same to the employee, the employee may not quite look at the reduction of the hourly rate as equal to the former pay.
V THE EXEMPTIONS.
Examination of the duties performed by the employee has always been an integral part of the determination of exempt status, and employers must establish that the employee’s “primary duty” is the performance of exempt work in order for the exemption to apply. Each of the categories included in section 13(a)(1) has separate duties requirements.
A EXECUTIVE EMPLOYEE:
(a) The term “employee employed in a bona fide executive capacity” in section 13(a)(1) of the Act shall mean any employee:
(1) Compensated on a salary basis at a rate of not less than $913 per week, exclusive of board, lodging or other facilities;
(b) The phrase “salary basis” is defined at §541.602; “board, lodging or other facilities” is defined at §541.606; “primary duty” is defined at §541.700; and “customarily and regularly” is defined at §541.701.
(a) The phrase “a customarily recognized department or subdivision” is intended to distinguish between a mere collection of employees assigned from time to time to a specific job or series of jobs and a unit with permanent status and function. A customarily recognized department or subdivision must have a permanent status and a continuing function. For example, a large employer’s human resources department might have subdivisions for labor relations, pensions and other benefits, equal employment opportunity, and personnel management, each of which has a permanent status and function.
(b) When an enterprise has more than one establishment, the employee in charge of each establishment may be considered in charge of a recognized subdivision of the enterprise.
(c) A recognized department or subdivision need not be physically within the employer’s establishment and may move from place to place. The mere fact that the employee works in more than one location does not invalidate the exemption if other factors show that the employee is actually in charge of a recognized unit with a continuing function in the organization.
(d) Continuity of the same subordinate personnel is not essential to the existence of a recognized unit with a continuing function. An otherwise exempt employee will not lose the exemption merely because the employee draws and supervises workers from a pool or supervises a team of workers drawn from other recognized units, if other factors are present that indicate that the employee is in charge of a recognized unit with a continuing function.
(a) To qualify as an exempt executive under §541.100, the employee must customarily and regularly direct the work of two or more other employees. The phrase “two or more other employees” means two full-time employees or their equivalent. One full-time and two half-time employees, for example, are equivalent to two full-time employees. Four half-time employees are also equivalent.
(b) The supervision can be distributed among two, three or more employees, but each such employee must customarily and regularly direct the work of two or more other full-time employees or the equivalent. Thus, for example, a department with five full-time nonexempt workers may have up to two exempt supervisors if each such supervisor customarily and regularly directs the work of two of those workers.
(c) An employee who merely assists the manager of a particular department and supervises two or more employees only in the actual manager’s absence does not meet this requirement.
(d) Hours worked by an employee cannot be credited more than once for different executives. Thus, a shared responsibility for the supervision of the same two employees in the same department does not satisfy this requirement. However, a full-time employee who works four hours for one supervisor and four hours for a different supervisor, for example, can be credited as a half-time employee for both supervisors.
To determine whether an employee’s suggestions and recommendations are given “particular weight,” factors to be considered include, but are not limited to, whether it is part of the employee’s job duties to make such suggestions and recommendations; the frequency with which such suggestions and recommendations are made or requested; and the frequency with which the employee’s suggestions and recommendations are relied upon. Generally, an executive’s suggestions and recommendations must pertain to employees whom the executive customarily and regularly directs. It does not include an occasional suggestion with regard to the change in status of a co-worker. An employee’s suggestions and recommendations may still be deemed to have “particular weight” even if a higher level manager’s recommendation has more importance and even if the employee does not have authority to make the ultimate decision as to the employee’s change in status.
(a) Concurrent performance of exempt and nonexempt work does not disqualify an employee from the executive exemption if the requirements of §541.100 are otherwise met. Whether an employee meets the requirements of §541.100 when the employee performs concurrent duties is determined on a case-by-case basis and based on the factors set forth in §541.700. Generally, exempt executives make the decision regarding when to perform nonexempt duties and remain responsible for the success or failure of business operations under their management while performing the nonexempt work. In contrast, the nonexempt employee generally is directed by a supervisor to perform the exempt work or performs the exempt work for defined time periods. An employee whose primary duty is ordinary production work or routine, recurrent or repetitive tasks cannot qualify for exemption as an executive.
(b) For example, an assistant manager in a retail establishment may perform work such as serving customers, cooking food, stocking shelves and cleaning the establishment, but performance of such nonexempt work does not preclude the exemption if the assistant manager’s primary duty is management. An assistant manager can supervise employees and serve customers at the same time without losing the exemption. An exempt employee can also simultaneously direct the work of other employees and stock shelves.
B. ADMINISTRATIVE EMPLOYEE:
(1) Compensated on a salary or fee basis at a rate of not less than $913 per week, exclusive of board, lodging or other facilities;
(a) To qualify for the administrative exemption, an employee’s primary duty must be the performance of work directly related to the management or general business operations of the employer or the employer’s customers. The phrase “directly related to the management or general business operations” refers to the type of work performed by the employee. To meet this requirement, an employee must perform work directly related to assisting with the running or servicing of the business, as distinguished, for example, from working on a manufacturing production line or selling a product in a retail or service establishment.
(c) An employee may qualify for the administrative exemption if the employee’s primary duty is the performance of work directly related to the management or general business operations of the employer’s customers. Thus, for example, employees acting as advisers or consultants to their employer’s clients or customers (as tax experts or financial consultants, for example) may be exempt.
(a) To qualify for the administrative exemption, an employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance. In general, the exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered. The term “matters of significance” refers to the level of importance or consequence of the work performed.
(b) The phrase “discretion and independent judgment” must be applied in the light of all the facts involved in the particular employment situation in which the question arises. Factors to consider when determining whether an employee exercises discretion and independent judgment with respect to matters of significance include, but are not limited to: whether the employee has authority to formulate, affect, interpret, or implement management policies or operating practices; whether the employee carries out major assignments in conducting the operations of the business; whether the employee performs work that affects business operations to a substantial degree, even if the employee’s assignments are related to operation of a particular segment of the business; whether the employee has authority to commit the employer in matters that have significant financial impact; whether the employee has authority to waive or deviate from established policies and procedures without prior approval; whether the employee has authority to negotiate and bind the company on significant matters; whether the employee provides consultation or expert advice to management; whether the employee is involved in planning long- or short-term business objectives; whether the employee investigates and resolves matters of significance on behalf of management; and whether the employee represents the company in handling complaints, arbitrating disputes or resolving grievances.
(c) The exercise of discretion and independent judgment implies that the employee has authority to make an independent choice, free from immediate direction or supervision. However, employees can exercise discretion and independent judgment even if their decisions or recommendations are reviewed at a higher level. Thus, the term “discretion and independent judgment” does not require that the decisions made by an employee have a finality that goes with unlimited authority and a complete absence of review. The decisions made as a result of the exercise of discretion and independent judgment may consist of recommendations for action rather than the actual taking of action. The fact that an employee’s decision may be subject to review and that upon occasion the decisions are revised or reversed after review does not mean that the employee is not exercising discretion and independent judgment. For example, the policies formulated by the credit manager of a large corporation may be subject to review by higher company officials who may approve or disapprove these policies. The management consultant who has made a study of the operations of a business and who has drawn a proposed change in organization may have the plan reviewed or revised by superiors before it is submitted to the client.
(d) An employer’s volume of business may make it necessary to employ a number of employees to perform the same or similar work. The fact that many employees perform identical work or work of the same relative importance does not mean that the work of each such employee does not involve the exercise of discretion and independent judgment with respect to matters of significance.
(f) An employee does not exercise discretion and independent judgment with respect to matters of significance merely because the employer will experience financial losses if the employee fails to perform the job properly. For example, a messenger who is entrusted with carrying large sums of money does not exercise discretion and independent judgment with respect to matters of significance even though serious consequences may flow from the employee’s neglect. Similarly, an employee who operates very expensive equipment does not exercise discretion and independent judgment with respect to matters of significance merely because improper performance of the employee’s duties may cause serious financial loss to the employer.
(b) Employees in the financial services industry generally meet the duties requirements for the administrative exemption if their duties include work such as collecting and analyzing information regarding the customer’s income, assets, investments or debts; determining which financial products best meet the customer’s needs and financial circumstances; advising the customer regarding the advantages and disadvantages of different financial products; and marketing, servicing or promoting the employer’s financial products. However, an employee whose primary duty is selling financial products does not qualify for the administrative exemption.
(e) Human resources managers who formulate, interpret or implement employment policies and management consultants who study the operations of a business and propose changes in organization generally meet the duties requirements for the administrative exemption. However, personnel clerks who “screen” applicants to obtain data regarding their minimum qualifications and fitness for employment generally do not meet the duties requirements for the administrative exemption. Such personnel clerks typically will reject all applicants who do not meet minimum standards for the particular job or for employment by the company. The minimum standards are usually set by the exempt human resources manager or other company officials, and the decision to hire from the group of qualified applicants who do meet the minimum standards is similarly made by the exempt human resources manager or other company officials. Thus, when the interviewing and screening functions are performed by the human resources manager or personnel manager who makes the hiring decision or makes recommendations for hiring from the pool of qualified applicants, such duties constitute exempt work, even though routine, because this work is directly and closely related to the employee’s exempt functions.
(h) Employees usually called examiners or graders, such as employees that grade lumber, generally do not meet the duties requirements for the administrative exemption. Such employees usually perform work involving the comparison of products with established standards which are frequently catalogued. Often, after continued reference to the written standards, or through experience, the employee acquires sufficient knowledge so that reference to written standards is unnecessary. The substitution of the employee’s memory for a manual of standards does not convert the character of the work performed to exempt work requiring the exercise of discretion and independent judgment.
(i) Comparison shopping performed by an employee of a retail store who merely reports to the buyer the prices at a competitor’s store does not qualify for the administrative exemption. However, the buyer who evaluates such reports on competitor prices to set the employer’s prices generally meets the duties requirements for the administrative exemption.
C. PROFESSIONAL EMPLOYEES:
(a) The term “employee employed in a bona fide professional capacity” in section
13(a)(1) of the Act shall mean any employee:
(1) Compensated on a salary or fee basis at a rate of not less than $913 per week, exclusive of board, lodging, or other facilities; and
(2) Whose primary duty is the performance of work:
(i) Requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction;
(ii) Requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.
(e)(1) Registered or certified medical technologists. Registered or certified medical technologists who have successfully completed three academic years of pre-professional study in an accredited college or university plus a fourth year of professional course work in a school of medical technology approved by the Council of Medical Education of the American Medical Association generally meet the duties requirements for the learned professional exemption.
(2) Nurses. Registered nurses who are registered by the appropriate State examining board generally meet the duties requirements for the learned professional exemption. Licensed practical nurses and other similar health care employees, however, generally do not qualify as exempt learned professionals because possession of a specialized advanced academic degree is not a standard prerequisite for entry into such occupations.
(3) Dental hygienists. Dental hygienists who have successfully completed four academic years of pre-professional and professional study in an accredited college or university approved by the Commission on Accreditation of Dental and Dental Auxiliary Educational Programs of the American Dental Association generally meet the duties requirements for the learned professional exemption.
(4) Physician assistants. Physician assistants who have successfully completed four academic years of pre-professional and professional study, including graduation from a physician assistant program accredited by the Accreditation Review Commission on Education for the Physician Assistant, and who are certified by the National Commission on Certification of Physician Assistants generally meet the duties requirements for the learned professional exemption.
(5) Accountants. Certified public accountants generally meet the duties requirements for the learned professional exemption. In addition, many other accountants who are not certified public accountants but perform similar job duties may qualify as exempt learned professionals. However, accounting clerks, bookkeepers and other employees who normally perform a great deal of routine work generally will not qualify as exempt professionals.
(6) Chefs. Chefs, such as executive chefs and sous chefs, who have attained a four-year specialized academic degree in a culinary arts program, generally meet the duties requirements for the learned professional exemption. The learned professional exemption is not available to cooks who perform predominantly routine mental, manual, mechanical or physical work.
(7) Paralegals. Paralegals and legal assistants generally do not qualify as exempt learned professionals because an advanced specialized academic degree is not a standard prerequisite for entry into the field. Although many paralegals possess general four-year advanced degrees, most specialized paralegal programs are two-year associate degree programs from a community college or equivalent institution. However, the learned professional exemption is available for paralegals who possess advanced specialized degrees in other professional fields and apply advanced knowledge in that field in the performance of their duties. For example, if a law firm hires an engineer as a paralegal to provide expert advice on product liability cases or to assist on patent matters, that engineer would qualify for exemption.
(8) Athletic trainers. Athletic trainers who have successfully completed four academic years of pre-professional and professional study in a specialized curriculum accredited by the Commission on Accreditation of Allied Health Education Programs and who are certified by the Board of Certification of the National Athletic Trainers Association Board of Certification generally meet the duties requirements for the learned professional exemption.
(9) Funeral directors or embalmers. Licensed funeral directors and embalmers who are licensed by and working in a state that requires successful completion of four academic years of pre-professional and professional study, including graduation from a college of mortuary science accredited by the American Board of Funeral Service Education, generally meet the duties requirements for the learned professional exemption.
(f) The areas in which the professional exemption may be available are expanding. As knowledge is developed, academic training is broadened and specialized degrees are offered in new and diverse fields, thus creating new specialists in particular fields of science or learning. When an advanced specialized degree has become a standard requirement for a particular occupation, that occupation may have acquired the characteristics of a learned profession. Accrediting and certifying organizations similar to those listed in paragraphs (e)(1), (e)(3), (e)(4), (e)(8) and (e)(9) of this section also may be created in the future. Such organizations may develop similar specialized curriculums and certification programs which, if a standard requirement for a particular occupation, may indicate that the occupation has acquired the characteristics of a learned profession.
(a) To qualify for the creative professional exemption, an employee’s primary duty must be 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, mechanical or physical work. The exemption does not apply to work which can be produced by a person with general manual or intellectual ability and training.
COMPUTER EMPLOYEES:
(a) Computer systems analysts, computer programmers, software engineers or other similarly skilled workers in the computer field are eligible for exemption as professionals under section 13(a)(1) of the Act and under section 13(a)(17) of the Act. Because job titles vary widely and change quickly in the computer industry, job titles are not determinative of the applicability of this exemption.
(b) The section 13(a)(1) exemption applies to any computer employee compensated on a salary or fee basis at a rate of not less than $913 per week, exclusive of board, lodging or other facilities, and the section 13(a)(17) exemption applies to any computer employee compensated on an hourly basis at a rate not less than $27.63 an hour. In addition, under either section 13(a)(1) or section 13(a)(17) of the Act, the exemptions apply only to computer employees whose primary duty consists of:
(c) The term “salary basis” is defined at §541.602; “fee basis” is defined at §541.605; “board, lodging or other facilities” is defined at §541.606; and “primary duty” is defined at §541.700.
The exemption for employees in computer occupations does not include employees engaged in the manufacture or repair of computer hardware and related equipment. Employees whose work is highly dependent upon, or facilitated by, the use of computers and computer software programs (e.g., engineers, drafters and others skilled in computer-aided design software), but who are not primarily engaged in computer systems analysis and programming or other similarly skilled computer-related occupations identified in §541.400(b), are also not exempt computer professionals.
Computer employees within the scope of this exemption, as well as those employees not within its scope, may also have executive and administrative duties which qualify the employees for exemption under subpart B or subpart C of this part. For example, systems analysts and computer programmers generally meet the duties requirements for the administrative exemption if their primary duty includes work such as planning, scheduling, and coordinating activities required to develop systems to solve complex business, scientific or engineering problems of the employer or the employer’s customers. Similarly, a senior or lead computer programmer who manages the work of two or more other programmers in a customarily recognized department or subdivision of the employer, and whose recommendations as to the hiring, firing, advancement, promotion or other change of status of the other programmers are given particular weight, generally meets the duties requirements for the executive exemption.
SOURCE REGULATIONS AND PUBLICATIONS:
https://www.federalregister.gov/articles/2016/05/23/2016-11754/defining-and-delimiting-the-exemptions-for-executive-administrative-professional-outside-sales-and
http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&amp;sid=48d6ee3b99d3b3a97b1bf189e1757786&amp;rgn=div5&amp;view=text&amp;node=29:3.1.1.1.23&amp;idno=29
https://www.dol.gov/WHD/overtime/final2016/faq.htm#3
© Copyright 2019, Van Suilichem & Assoc., P.C.