FLSA & Overtime Rules

Jennifer Thompson

HR Consultant

Materials, information, advice and recommendations provided by MWG Employer Services are intended as general guidance only and are not a substitute for legal or other professional services. You should always seek appropriate legal or other professional services when dealing with specific facts or circumstances. MWG Employer Services, its employees, agents and representatives do not provide legal, tax or accounting services.

• What is the FLSA

• Deeper definition of FLSA

• Understanding of an “Employee”

• Work Week and Work Day

• New FLSA requirements

• Exempt VS Non-Exempt

• Best Practices

• Record keeping requirements

• Fines/Penalties

Topics of

The Fair Labor Standards Act (FLSA) is a federal law which establishes minimum wage, overtime and part-time workers in the private sector and in federal, state, and local governments.

What is FLSA?

Who is covered by FLSA? • Over 135 million workers in

more than 7 million workplaces

• Enforcement - Wage and Hour Division of the U.S. DOL.

• “Enterprise Coverage" and “Individual Coverage.“

• The FLSA "covers" or applies to all employees of certain "enterprises."

• All employees of an enterprise, as defined by the FLSA, are covered regardless of the duties they perform.

• Almost every employee in the United States is covered under FLSA.

• Elected government officials are one of the few exceptions.

The Bottom Line

DOL refers to a business as an “Enterprise” These enterprises, which must have at least two employees, are: (1) Those that have an annual dollar volume of sales or business done of at least $500,000. (2) Hospitals, businesses providing medical or nursing care for residents, schools, preschools, and government agencies. (www.dol.gov) Note: Common ownership, unified operation, common control or common business purpose qualifies as “ONE” company for many DOL Requirements including FLSA.

What is Enterprise Coverage?

• Even when there is no enterprise coverage, employees are protected by the FLSA if their work regularly involves them in commerce between States ("interstate commerce").

• The FLSA covers individual workers who are "engaged in commerce or in the production of goods for commerce.“

What is Individual Coverage?

Any work involving or related to the movement of persons or things (including intangibles, such as information) across state lines or from foreign countries.

Interstate Commerce

Examples: Any form of communication with persons in another

state. An employee who travels to another state. Receipt of goods from another state or country. Sale of any goods or services used outside of the state. Any credit card purchase.

Wickard v. Filburn (1942)

• Almost every employer’s business, product or service is involved in “Interstate Commerce”.

• Almost every employer is considered an ”Enterprise”; or their employee is covered as an “Individual”.

• Therefore, just about everyone is impacted by FLSA regulations and subject to its requirements.

The Bottom Line

• To be considered an “Employee”, an employment relationship must exist between the worker and the employer.

• “Employ” is defined as “suffer or permit to work”, which covers work the employer directs or allows to take place.

• “1099 Employees” or “Contract Employees” are independent workers who are in business for themselves. These workers are NOT employees.

Who is an “Employee”?

• A 7-day work period must be designated by the Employer to determine a 40-hour work week.

• You must notify your Employee(s) of designated work week.

• Non-Exempt Employees must be paid overtime for more that 40 hours within the work week. (unless classified as emergency personnel).

• Some states define overtime as

more than 8 hours a day.

Defining a Workweek

• The time an Employee starts and ends their job duties required by the Employer.

• Work not requested but be performed is work time that must be paid by employer.

• Some states require employees to be paid overtime for any hours in excess of 8 in a day.

Defining a Workday

1. Salary Basis ONLY

2. Minimum Salary

3. Job Duties Test

Exempt vs. Non-Exempt

In order to determine if an employee is EXEMPT you must qualify employee in all 3 Test requirements:

• Fixed salary paid to employee for work performed.

• The salary IS NOT subject to reduction due to work quality or quantity.

Salary Base Test

• Current minimum is $455/Wk., $23,660/Yr. • December 1, 2016 - $913/Wk., $47,476/Yr. • Maximum 10% - nondiscretionary bonuses,

incentive payments, or commissions.

Salary Level Test

Job duties must meet required definition of

• Executive

• Administrative

• Professional

• Outside sales

• Certain computer employees

• Highly Compensated

• A “manager” title does not automatically provide an exempt status.

Duties Test

• Regularly supervises two or more employees • Has management as the primary DUTY of position • Has some genuine input into the job status of employees (such as

hiring, firing, etc….)

Executive Employee Duties

Office or non-manual work, which is: • Directly related to management or

general business operations of the employer or the employer's customers,

• A primary component of which involves the exercise of independent judgment and discretion about

Administrative Employee Duties

• Matters of significance: In other words, the job duties are designed for relatively high-level employees whose main job is to "keep the business running"

Professional exempt employee job duties are: DOL classification of a “Learned Professions”

• Lawyers • Doctors • Dentist • Teachers • Architects

• Clergy • RN (not LPN) • Accountants (not

bookkeepers) • Engineers

• Pharmacists • Scientists (not

Technicians)

Employee’s job duties would be that of a traditional role of “learned professions”. Example: an RN working as a bookkeeper would NOT be exempt.

Professional Employee Duties

Exempt Outside Sales Employee Outside Sales exempt employee job duties are: • Primary duty must be that of making sales, obtaining orders or contracts for

services; and • Duties must be customarily and regularly performed away from employer’s

place of business.

Primary Duties must consist of:

• The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;

• The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;

• The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or

• A combination of the aforementioned duties, the performance of which requires the same level of skills.

Computer Employee Duties

Systems Analyst, Programmer, Software Engineer

• Current minimum is $100,000 annually

• December 1, 2016 – Minimum is $134,004; and

• Primary duty includes performing office or non-manual work; and

• Perform at least 1 of the duties of the other exemptions

Highly Compensated Employee

Non-Exempt Employees: • Did not pass ALL 3 testing requirements. • Must be paid federal minimum wage of $7.25 or more per hour

worked. • Entitled to overtime pay. Overtime for Mississippi are more than

40 hours worked in a work week. • Must record employee’s worked time. Additional Note: • A manual laborer or other “blue-collar” workers WILL NEVER be

Exempt. • “Emergency Personal” - Fire Fighters, Police, Paramedics and other

First Responders are Non-Exempt employees that have specific overtime requirements.

Non-Exempt Employee

• IS NOT ALLOWED unless business is federal, state or local government.

• Certain requirements apply. • Emergency personal may accrue up to 480 hours all other

government personal may accrue up to 240 hours.

Comp Time

The Bottom Line If an employee is NON-Exempt you MUST pay employee for hours worked over 40 hours as overtime.

• Do not procrastinate! • Identify all salaried employees. • Determine who will not meet the minimum salary level. • Determine who meets the duties requirements. • Communicate any changes to employees affected. • Reevaluate time keeping records for Non-Exempt employee(s).

Best Practices

Record Keeping Requirements • Employee name • Social • Address • DOB • Sex & Occupation • Week schedule time + days • Hours worked each day + Week total • Wage based on pay • Regular Hourly Wage • Total daily or weekly straight pay • Total overtime earning for week

• All additions or deductions to/from wages

• Total wages paid each pay period • Pay date + dates of pay period • Keep for 3 years of payroll records • Keep 2 years of employee time

cards • Must be kept for easy access or

review

• Payment of ALL Back Wages and Underpayments

• Additional fines or penalties:

• Violations my result in criminal or civil.

• Fines or penalty up to $1,100 per violation.

• Repeated violations up to $11,000 per employee.

• $50,000 penalty for child labor violations

Fines/Penalties

Jennifer Thompson

601-206-7924

Jennifer.Thompson@MorganWhite.com