you know, you can ask questions any time you'd like. We are hoping this presentation will be just about an hour and we're going to allow additional time for questions after we're done speaking. And there is an audience question box. You're welcome to text in or type in your questions at any time you'd like. And if we can't get to them right away, certainly at the end of the presentation, we will answer each and every question. So on Wednesday, May 18th, the Department of Labor issued its final rule. And that rule has been in the making for well over a year. And at that time, the Department of Labor said in order to be considered an exempt employee and not have the ability to earn overtime, as of December 1st, that employee will need to make $913 per week. Now, of course, for every rule, there are a few exceptions and we'll talk about those today. But basically it increased that salary level from $455 a week, which is what it is now, to $913 a week. That's a very significant jump. Excuse me, Carla, this is Maureen. Yeah, can you explain why that was such a significant jump? I absolutely can. Back in 1938, when the Fair Labor Standards Act was enacted, there was a threshold that was set. That threshold was updated then in 1940. It was updated again in 1949. It was updated in 1958, 1962, 1970, 1975. And then it wasn't touched again until 2004. And now it's been another 12 years before it's been touched again. So they've really tried to bring this up to a 21st century standard and really only include people who truly should not be entitled to earn overtime with that number. And now it will be updated now every three years. So beginning in 2020, every three years, this minimum threshold will be updated. Thanks, Maureen, that was a great question. So today, why are we here? We wanna make sure we're gonna help you understand what it means to be an exempt employee because beyond that salary threshold, there are a few other things that also apply. We're also going to explain what liability that you could be subject to at your company if you misclassify people. And actually, there are penalties that can be imposed in certain states even for the person processing payroll. Excuse me. We're also going to help you understand how to properly classify your employees and properly pay your employees so that you avoid any Fair Labor Standards Act liability. So today, Maureen and I will both be covering what the FLSA is, the Fair Labor Standards Act, what the Department of Labor is, the DOL, what is an exempt employee, special categories of exempt employees, tips for properly classifying your employees, and also the importance of timesheets. So the Fair Labor Standards Act was enacted in 1938. At that time, as I said prior, it did establish a minimum wage. And today, federally, that minimum wage is $7.25 an hour. Your state may have a different minimum wage. In Illinois, we have a different minimum wage. Actually, in Illinois, even different towns and counties have different minimum wages. So that might be the case in your state as well. The Fair Labor Standards Act also requires that employees be paid a time and a half for all hours actually worked over 40 in a week. It doesn't say that you need to include vacation time in there. It doesn't say you need to include holiday time in there, but for hours that are actually worked over 40 in a week. At the same time, again, there are states that have different requirements. California is over eight hours in a day. So make sure that, we're talking about the Federal Fair Labor Standards Act, but make sure your state doesn't have additional information. It also requires equal pay for equal work. In other words, you don't pay men and women differently for doing the same work. That would be illegal. There is a timesheet requirement in the Fair Labor Standards Act. Employers are required to keep accurate time records for all employees, regardless of whether or not they're exempt. And many employers don't understand that and don't do that. And there's also a poster that's required. And anybody who needs that poster, you can download it for free from my website. And that information, if you didn't see it on that second slide, will be provided again later in the presentation. So what else? The Fair Labor Standards Act does talk about those exemptions. And there's that poster there that you can see it right there on the right of your screen. There are exemptions for executive, administrative, and professional employees. There are other exemptions, but today that's what we are going to be focusing on. And there's also exemptions to overtime requirements for employees subject to a collective bargaining agreement. And those of you who are attending who have unions, you need to pay close attention to that because those are your collective bargaining agreements. The wage and hour division of the Department of Labor is the enforcement arm for the Fair Labor Standards Act. And for those of you who might be out there in accounting and not in an HR role, all I can tell you is that the Department of Labor is a cousin of the IRS. So they take the laws that they administer just as seriously as all those tax laws. In fact, in human resources, there are probably eight or nine departments that we have to deal with, unlike you guys in accounting who only have to deal with the IRS. You wanna be aware, as I said earlier, about state regulations. Many states do have their own wage and hour laws. Most of the time, if they do have their own separate law, it's most of the time gonna be higher than the federal law. But what you need to know is that you need to follow the law that best benefits the employee. If you have a state law that has a higher minimum wage, that's the wage you have to pay. If you live in a town such as Chicago that has a higher minimum wage than the rest of the state, you have to follow that law that best benefits the employee. And generally, a state won't have a higher time overtime requirement. However, some states, as I said, California, over eight hours in a day. And there may be posters that the states have required you to post as well. Again, federal posters, you can download them at no charge from my website. And if you want state posters, email me and I'll send you the set for your state PDF form that you can print right there at your computer. And now I'm gonna ask Marie to come in and talk a little bit about some more of the specifics. Thank you, Carla. I see a couple of questions coming in and we're gonna be sure to address those in the presentation. And if it does not appear that they were adequately covered during the presentation, we will talk about them specifically at the end. So I'd like to start first with the violations. What are the remedies for violations of the Fair Labor Standards Act? And I wanna talk about this because there is a lot of thought about what the new rule may cost an employer in terms of overtime pay or a higher salary, but not to be overlooked and very important, are the remedies available to an employee if it is determined that an employer has violated the FLSA? And I have to say that it is easy to violate the FLSA. The remedies that are available to an unhappy employee or a disgruntled employee or a terminated employee who may file a claim against the employer for a violation of the FLSA includes back pay. And that can go back to up to three years, two years generally and three years if there's a willful violation, which really means an intentional violation. And given all of the media coverage and webinars and all of the information being provided now about what the FLSA requires, it would be fairly easy for an employee to establish a willful violation of the law on the part of an employer. Another element of damages in an FLSA case is liquidated damages, meaning an employee would get both back pay and then an equal amount as damages. The other attractive element of a violation for an employee in terms of getting an attorney is that the attorney's fees of the employee are recoverable. So all in all, this can amount to a very expensive matter for an employer that does not follow the rules of the FLSA and finds itself being accused of violating the FLSA. So what constitutes violations of the FLSA? These are the things we talked about earlier. What are the different elements of the Fair Labor Standards Act? So not paying minimum wage, not paying overtime for overtime hours worked, misclassifying an employee is exempt and then not paying that employee as a non-exempt employee. But the other one that I think is very easy for a well-meaning employer to get caught up with is not maintaining proper timesheets. And that's why we're gonna talk about that as an element of this webinar today. The other elements of a FLSA violation can be violating the equal pay for equal work provision and then not posting the proper signage. So in terms of this as well, be careful who you classify as an exempt employee. There is a tendency to wanna be aggressive on that and find ways to make an employee exempt. The law views it differently. The law views an exemption as a very narrow exception to the general rule, which is that employees should be paid overtime for hours over 40 worked in a week. So they view, the law views and the Department of Labor views the exemptions as very narrow and it is a burden on the employer to plainly and unmistakably demonstrate that an exemption applies. So let's get into now what makes someone an exempt employee. There are three elements to an exempt employee status. It is not simply the duties, which we will cover as part two here, but also the fact that the employee earns a salary and the certain level of salary. And it is this third test, the salary level test, that the Department of Labor changed that will take effect on December 1st with the new salary. The new rule did not change the salary basis test nor did it change the duties test. So the salary level test requires that an exempt employee be paid a predetermined and fixed salary. Because of this test, an employee, an exempt employee can be expected to work more than eight hours a day, but they must also not be penalized for working less than eight hours a day. So if you have your exempt employees fill out timesheets, and if they work a half a day and are required to take PTO time for the other half of the day, you're penalizing the exempt employee, you're treating them as an hourly employee, and under the law, they will not be considered an exempt employee, even if they otherwise make the proper salary, and even if their duties would make them an exempt employee. Now by penalizing, I don't mean that you cannot treat this as a disciplinary issue. So if you have exempt employees who say, wow, all I have to do is work an hour or two a day, and that's okay, I'll get paid my full eight hours. Yes, you would pay them the salary, but it's a disciplinary issue, and you would handle that as a disciplinary matter about them not fulfilling their duties. But you cannot deal with it by saying or requiring them to use PTO time for those extra hours not worked in a day. The next test for determining whether someone is an exempt employee is the duties test. And there are three types of employees that qualify as, under their duties, as exempt employees, executive, administrative, and professional. The first, yes? This is Carla, and I have a question. Many AED members are family-owned businesses, and is there a carve-out? I know there is the executive, I know there is the professional, and I know there is the admin. Is there a carve-out for family members too? No, there is not. There is, so if you have a family member on the payroll, they are an employee and are viewed the same way under the law as any other employee. The only carve-out is for someone who is at least a 20% owner of the business and is also actively engaged in the management of the business. But there is not a separate exemption for family members. Thank you. So an executive employee, these are really your highest level employees in the organization. So they must have as his or her primary duty the management of at least a subdivision of the organization. That means they must supervise at least two full-time employees, and they have to have the authority to make hiring and firing decisions. And authority really means that. It's not just they can give advice on it, but they have to have the final say. So that would be an executive employee. The next level is an administrative employee, and I think it's within this area where there is the most confusion and possibility for error in terms of classifying an employee. So an administrative employee must, again, have as their primary duty, it must be office or non-manual work. So if they work in a warehouse or in a plant, they will not be an administrative employee, even if they're the supervisor there. If they're working in the plant, they will not qualify as an administrative employee. So they must have office or non-manual work directly related to the operations of the employer or the employer's customers. And again, they must have the responsibility to exercise discretion and independent judgment with respect to significant business matters. And I think of this in terms of maybe someone who's an administrative assistant or an office manager. They may not qualify as an administrative and an exempt employee under this test if they're really not exercising discretion and independent judgment with respect to significant business managers. For example, they may have some say in determining when someone may go to lunch or other office-related duties, but if their duties do not really relate to a significant element of the company's business, while they may be very valued and very important to the company, they will not be considered an exempt employee because they're as an administrative employee. And in terms of this, you may, as we talk about this, have specific questions for your employees. And we are happy to talk about those offline and even at a separate time and during the question and answer. But if you come away from this feeling, I really would like to talk about these particular categories, we're happy to do that with you at a later date. So then finally, is the employee a professional employee? So a professional employee, it's focused on the level of education of that employee and the job they fill in the organization. So an attorney, an accountant, are professional employees. An engineer is a professional employee. If however, you hire an attorney, but you hire them as an HR field rep, the fact that that person is an attorney will not make them a professional employee because they have a law degree. It depends on the job description for that particular job. So if the job of a field rep is a non-exempt job, they will not be a professional employee even though they have a professional degree. Skilled computer employees, meaning computer systems analysts, programs and software engineers are considered professional employees. In all of this, there are two things that really matter. And the first is a job description. And we talk about this because oftentimes employers may not have job descriptions for all of their jobs. We all know what the person does, but when asked to provide a written job description, it doesn't exist. It is very important, a takeaway from this really should be going back, looking at all of the jobs in your organization and making sure that each job has a job description. Maureen? Yes. It's Carla again. I just wanna ask one question because I see this come up in my practice frequently. I'll have a client employer who will have two different people with the same title, one classified as exempt and one classified as non-exempt. And what I've always told them to do is make them a level one or two because it's my understanding that you should not have the same job and have the same job title and the same job description and have people being either both exempt and non-exempt in that job. Am I telling my clients correctly? Yeah, that is absolutely correct. In fact, if that was the situation and the exempt employee complained that they should have been treated as non-exempt, the fact that they had the same job title and same job description as a non-exempt employee would be the best evidence of that. So if, and this is why, if you claim that someone is an exempt employee, their job description must line up with the duties that we've just described about what makes someone a professional and administrative or an executive employee. And you must also make sure that that job description is not the same job description or the same job title for someone that you have in a non-exempt function. Sometimes this happens because although we have a job description and a job title, we think about the jobs in terms of the individual in that job. And for purposes of the law, you need to focus on the more objective factors, which is the job description and the job title. So the other part of this though, is then making sure that what the person is actually doing matches up with the job description. If you might have a wonderful job description that on paper would qualify someone as an executive, administrative, or professional, but as a practical matter, they're not doing that job. So it's not enough to just give them a nice title and have a nice job description. If that employee wants to complain about their classification and they'll be able to demonstrate what they actually do in a day, that will also be significant. So make sure that all of those things line up. Again, importance of the job description. We have another slide here because we can't stress the importance and we know how easy it is sometimes to not have job descriptions for all jobs. So make sure that the job description accurately reflects what the person does, what that job requires. And again, make sure the titles and descriptions match up. If you have three administrative assistants, then they should all have the same job description. If you have different levels, then there should be different job descriptions. And if you determine that one of those levels is an exempt employee, then you go back to what we've talked about earlier in terms of what makes someone an administrative employee, an exempt employee, and make sure that job description matches up with those requirements that we've talked about. The third test now, and this is where the new Department of Labor rule comes in, is the salary level test. And this is the big jump that Carla talked about earlier. Oftentimes when employers were thinking about whether someone was an exempt employee or not, they really didn't think about this third test. Because the level was so low, most exempt full-time employees did earn this much. But now those numbers are being raised and that's why there's more focus being paid to this test. So as we've said, the amounts are now $913 per week or $47,476 per year. And the Department of Labor, when issuing this rule, talked a lot about how they arrived at these numbers. And this slide sort of explains where they came up with it. So they took, not looking, focusing on the highest level salaries in the country, but the area of the country where generally salaries are the lowest and based it on that amount. Non-discretionary bonuses and commissions can be used in calculating whether an employee earns $47,476 a year, up to 10% of that non-discretionary bonus, as long as employers pay those amounts at least quarterly. And you have until the end of a quarter or until the next pay period immediately following the quarter. What is a non-discretionary bonus? A non-discretionary payment, a payment is non-discretionary if either the fact of the payment or the amount of the payment is promised to the employee. So examples, yes? So it's Carla again. So that means that if an employer gets up in the morning around the holidays and says, gee, I think I wanna give everybody a Christmas bonus, that would be discretionary because it's not tied to anything. But if the employer says, if you bring in this many sales or if our company does this well, then that becomes part of their wages. Is that what you're saying? That's what I'm saying, yes. So it's both the fact of, or it's either the fact of a bonus or the amount. So the two examples here are an employer promises to pay a bonus to its employees in June. It doesn't say the amount, but it says, if you earn this, or if you do this, you will receive a bonus. You have now made a promise to pay a bonus, and that is a non-discretionary bonus. Alternatively, you might say, we will pay a $500 bonus in June if the company's financial condition makes that possible. So you're not saying everyone will get a bonus, but you're saying, if we can do it, you will get $500. Because you have promised an amount, that is a non-discretionary bonus. And 10% of that bonus can be used in calculating the salary level if the bonus is paid on a quarterly basis. Now, there are special rules for certain categories of employees, and we wanna go over those now. The first is outside salespersons. Outside salespersons are exempt employees regardless of the amount they earn. So even if they don't earn at least the $47,476 a year, the fact that someone is an outside salesperson, makes them an exempt employee. What is an outside salesperson? They must regularly and consistently work offsite, generally at least 80% of the time, and must have as their primary duty, the responsibility for making sales calls or securing orders for services or the use of facilities. And offsite means calling on customers. The fact that someone may get to work from home or a satellite office does not make them an outside salesperson. Inside sales representatives, inside salespersons, are generally considered non-exempt. And that's based on their job duties, not because of the new salary level test. So the law says inside salespeople are non-exempt employees. You might have an inside salesperson that really has as another job, something that truly qualifies as an exempt position. But if that is the case, then the job description and their title and their duty should accurately reflect that. But if basically the job of a person is to be one of your inside sales representatives, they are going to be a non-exempt employee. There is also a definition of highly compensated employees in the new rule, and that it changes the amount of someone who is a highly compensated employee from $100,000 to $134,000 a year. This is a specialized rule. Essentially, the person still must make at least the $47,476 a year. They must perform office or non-manual work. And the relaxed standard for a duties test is slightly relaxed for a highly compensated employee. This is a specialized category. I wouldn't want to spend a lot of time on it. If you have specific questions about whether one of your employees qualifies as a highly compensated employee and therefore can continue to remain as an exempt employee, we should talk about that either during the questions or offline. So now, how do we figure all of this out? I've come up with some ideas that work in my head. They might be a little bit different for you. But I started with a spreadsheet of your exempt employees. And I would categorize them by their job title, not by the employee name. Again, this goes back to the idea that you're not looking at, oh yeah, you know, Jane does this or Jack does this. It's more about what do you require of your bookkeeper or your office manager. So look at the titles. Remove from your spreadsheet any of your outside salespeople because they're exempt even if they make less than the $47,000. Also remove any of your inside salespersons because they're going to be non-exempt no matter what under the law. With your remaining exempt employees, look at them by their job description and figure out if they really are exempt based upon their duties test. So this is focusing on one of the three tests, the duties test. So do they pass the duties test? If yes, then ask yourself, do they earn a salary? And again, this goes to are they, they're a salaried basis. They are not docked for working less than a full eight hours a day. If they earn the salary and are treated as I've discussed, then do they earn at least $47,476 a year? If yes, then those people are exempt employees. If you have an employee that passes the duties test or that does not pass the duties test, you stop right there and they should be classified as non-exempt. It will not make a difference that they earn a salary or that they earn over the new threshold. If they don't qualify as exempt based upon their duties, they are a non-exempt employee. And then they're subject to the minimum hourly wage requirements and the overtime requirements. So looking again at the spreadsheet of your exempt employees, do they pass the duties test? If they do, then do they earn a salary? If not, if they're paid on an hourly basis, then if you want to classify them as exempt, then you need to change them to a salary. But is that salary at least $47,476 a year? If the answer is no, then they would be non-exempt and are entitled to overtime pay. If you have employees that are really truly exempt under the duties test and you want to keep them as exempt employees but they're being paid less than the $47,476 a year, the question then becomes for you whether you can bring them up to that salary level. And if you can, then they will be exempt. But if you can't, then they would need to be reclassified as non-exempt. And for those employees who are truly exempt based upon their duties but make less than the $47,000, so as we've said, either increase their salary or begin to pay them overtime for the hours actually worked over 40. And how do we do that? How do we keep track of all this? This is using timesheets. And now I will turn it over to Carla to talk about that topic. Well, Maureen, I'm going to ask you... Oh, now I can use the arrows. So thanks, Maureen. I think that was really good information. I see we have many, many questions coming in and we will get to all of them before the end of our presentation. So as I said earlier, excuse me, the law requires that you maintain accurate time records for all employees. It doesn't matter if they're hourly or if they're exempt, hourly or salary, you still as an employer need to maintain accurate records for all employees. Because exempt employees aren't supposed to... You're not supposed to be looking at their hours to figure out their pay. I think that's probably why over the years employers have not required exempt employees to keep their time. But that's the law. You're supposed to be doing that. And the only way you're going to be able to determine the right way to pay your employees and how to communicate any changes to them is if you have an accurate accounting of their hours. So now is the time to start filling out time sheets. And employees must fill them out and there has to be some way for you to recognize that it came from the employee. So signing their time sheet is probably the best way to have that happen. They should also have supervisory approval marked on them. And if you find that you're non-exempt, are working over 40 in an hour, it becomes a disciplinary action for you because of course you could not say to the employee, we're only going to pay you overtime if it's approved. That would not be legal. You have to pay employees for all hours worked. One of the things I like to do and keep these in half hour increments, don't have them do this in anything less than a half hour increment, but if an employee is consistently working more hours than they're allowed to work and it's a non-exempt employee, so you're having to pay out that overtime, have that employee clock out. Let's say they end work at 2 o'clock in the afternoon. Have them clock out at 115 and clock back in at 145. You haven't allowed them to go home early. You've required them to be there for the end of the day. You'll get your time back because of course if you're watching their time clock every day and the hours they're recording, you'll see that they have gone over 40 for the week or however many hours in the day that you are required to pay for overtime. But making it difficult for the employee usually sends the message that we're not going to condone this anymore. You're treating it as a disciplinary issue, which is fine. You're not docking their pay, which again would be illegal. So when you're looking at these timesheets, when you have these records in front of you and if you start now, the rule of thumb is you need at least 90 days to be able to analyze what you're going to do. So you're going to need to look at different scenarios. What's it going to look like financially to us if we raise that salary to the threshold of 47, 476? What's it going to look like if we change classification to non-exempt and begin paying overtime? And what if we cut hours to 40 hours a week for everybody and then discipline them if they work over and hire additional staff to cover the workload? So those are really your three options that you're going to take a look at. And I can tell you that if you are going to reclassify as a non-exempt and begin paying overtime, you need to think about the conversation you're going to have with that employee because it may mean that their hourly rate is going to significantly drop so that you have the wiggle room to make up their salary with those overtime hours. And sometimes employees don't like to hear that message at all. So start early. This change takes effect on December 1st. And one of the reasons you want to start calculating time now if you haven't been doing that is so that you have enough time to gather the data you need, three months, so you've got all of August, all of September, all of October. And then you have all of November to communicate with your staff about the changes because they're going to want to know what's going on. They're going to know why, what led you to this conclusion. And I can tell you that over the years, I have run into so many employers who have misclassified their employees. This is an excellent opportunity for you to make those changes and blame it on changes to the law. It's not your decision. The laws have changed. The status has changed. This is what we're forced to do. Your pay is not going to be cut. It's just that it's going to look different because you're going to have a lower hourly and a whole lot of overtime that come into that calculation. And the employee might not like it, but at least they have enough time to absorb it, understand it, and become accustomed to it before the change goes into effect. I would imagine that, would you recommend that salaried employees or people who are now exempt fill out timesheets? And if that's the case, how do you get the employees to do that and not feel offended or view this as a slight or just to change the practice? How would you recommend dealing with that? That's a great question, Maureen. Thank you for asking. What I would suggest that you do with your exempt staff is sit down and say, you know, the rules are changing. And in order for us to make sure that we're continuing to comply with the rules, we need all of our exempt employees to complete time records. And this isn't a, it would be nice if you would do this. It's going to be a requirement. Now there are several ways that you can do this. You can fill out a timesheet by hand. You can fill out an email or electronically an email to us. You may have a system where the employee is logging in and that's acting as their time in and time out at the end of the day. There are a number of ways that you can, your employees could record their time. It's just absolutely imperative that they do this. And again, if they are not complying, it becomes a disciplinary issue. And even for your exempts, if you send the exempt employee home for a full day for a disciplinary reason, you would be able to dock that full day. So I would consider that if you have employees who are really digging their heels in, that that's what you do to combat it. It's not a, as again, it's not something that would be nice. It's something that is a job requirement because of the changes in the law. And you're absolutely not going to be allowing an employee to, because they don't want to fill out a timesheet, would make you break the law. So I would approach the employee that way. Okay. Thank you for asking. Back to communicating the change to affected staff again. So you start early. Not your decision. The law has changed. You're either going to be bumping them up to a new level. You're going to be putting them in an hourly rate that when you calculate it out, look at what their pay is now and have your accounting department work backwards so that you know this is the base rate and then this is the overtime rate. If you don't do that and you just take that salary and divide it by 40 when they're actually working 60 hours a week, you're going to have a really rude awakening when you see that first payroll including all those 20 hours of overtime. Let the employee know how the new wage was determined. Show them the calculation that you used to get to that wage. Let them know the number of hours they're still going to be expected to work every day or every week. And if those hours are worked, what their pay is going to look like. So at the end of the day, it's not a significant change. It might be a little bit higher. I certainly wouldn't make it a little bit lower. But it's nothing. It's pretty much an equal tradeoff. It's just that their status has changed. So now instead of this salary, it's an hourly plus overtime rate. Also, let them know what will happen if they work additional hours without authorization. Again, discipline them. Don't refuse to pay them. And also let them know what will happen if they don't work the hours you're expecting to work. So those would be the things that you should be absolutely communicating to your employees. So what questions might you have for us? I see that there are several in here. And since I still have the screen, I'm going to look at some of these and see if I could answer. Maureen, is that good with you? Carla, while you've been speaking, I've been looking at some of these. And I can see that there's been a large outcry because of what we've talked about with timesheets. And so while you're going through things, let me start with my thoughts. And then you can chime in. All right. So how do we ask executives in a company to fill out timesheets? That seems ridiculous, doesn't it? And it may be that you will not have your executives fill out timesheets. All right? There is not a requirement. There is not a requirement for timesheets for exempt employees. It is a recommended business practice for many levels of your employees. And what you're trying to protect against is in the event the employee is considered a non-exempt employee, you want to show how you were treating them in terms of their pay. Also it is helpful in terms of calculating paid time off, vacation time, sick time. So if your exempt employees are just simply allowed to come and go, how do you keep track of their vacation days they've accrued or their sick days? Those are all some business reasons why you may want to include timesheets. There may be good business reasons why you do not want to have your truly exempt employees fill out timesheets. So I do want to clarify, it is not required by law with your exempt employees. But oftentimes for other business reasons it might be a good idea. If I could jump in here. I don't know if we have any participants from Illinois. In Illinois it actually is a requirement. The requirement was updated on August 14th of 2014. And on that date it did become a requirement in Illinois for exempt employees to complete timesheets. Okay. So it is something you would need to roll out. And I would imagine if it's the law in Illinois then it's probably the law in many other states. So as a general matter it is a good idea to have the timesheets. Yeah. And I think they did that here in Illinois because so many people were misclassified and they just wanted to get ahead of what they knew was coming down the road. Okay. If an employee falls under the duties category for an exempt employee but is part time, the three tests still apply. So the person must earn a salary and must be paid at least $913 a week. That amount, those amounts, the salary levels are not prorated for part time employees. Inside sales people were asked why are they considered non-exempt. Carla, you may want to talk about that. But generally that's what the Department of Labor has determined that inside sales persons are considered non-exempt. Yes. That's true. And it goes to the duties test. They're not making, they're not really, their primary duty isn't the management of companies. All they're doing is they're on the phone, they're taking orders, they're processing requests. Even if they're figuring out quotes they're using something internally that's been designed and developed for internal use. So they're not making decisions on matters of significance. They don't reach that threshold to be considered exempt under the executive, administrative or professional category. There are a couple other questions as long as I'm there that I kind of want to talk about too. There was a question in here about an HR manager and if an HR manager would be considered a professional, qualifying education would not make them or I mean, you know, continuing PPEs or CPEs or anything like that would not necessarily make them exempt. However, that HR manager even in a department of one might be considered exempt under the administrative rule if that person is the gatekeeper for anyone coming into the company. If that person is making decisions on which healthcare provider you're going to make. If that person is running a department even if they don't have staff and Maureen, tell me if you are of the same opinion here. Because they are running that department and that department is an integral part of managing the company, that person could be considered exempt. Yes, I would agree. Okay. And then the other one that I want to... I know somebody here is asking about minutes and rounding. Yes, you are allowed to round as long as you're rounding both up and down and you're benefiting the employee as much as you're benefiting the employer. The Department of Labor stated a long time ago that any break of less than 30 minutes is considered working time. So if you're going to have an employee punch back out as a disciplinary measure and punch back in, my recommendation would be that that break is at least 30 minutes and that's where that came from. Okay. Now someone asked about a list of each state that has this IAW. I'm not sure what IAW is. So I can't answer that question. If you could give us a little more clarification on that, that would be great. There's a question here about... This was going back to the salary basis test, meaning if you have an exempt employee, can you make a person, an exempt employee, take a vacation time if they only work for half a day? You cannot. If they're gone for a day, they take a vacation day. But if they're gone for half a day, that's part of being an exempt employee. Just like they can work 12 hours in a day and they don't get overtime or extra time for that. I know that sometimes there's sort of an unwritten or it might be written, I don't know, a rule about, well, if you work more than your eight hours, you get comp time. If you're an exempt employee and you work 12 hours a day, that's what being an exempt employee is. If you are working less in another day, the employee gets the benefit of that as well. And as we talked about, if that's happening a lot, that becomes a disciplinary issue. The awarding of comp time in lieu of paying overtime is not available to private employers. That is only available to certain government employers. So look at your policies about whether that's something you've written into your handbook or employee policies. Now I also see a question here about a parts manager or a service manager qualifying as an exempt employee or administrative exempt. Yes, just like the HR manager that I discussed, if that person runs that department, and even if they don't have two full-time equivalents working for them, that would be the executive exemption. But if they're running that department and they're ordering the parts and making decisions about vendors and making decisions about schedules and doing all those kinds of things, that they're managing an integral part of the company, then yes, my understanding would be that they could be considered an administrative exempt employee. But an administrative employee must be doing office or non-manual work. Right. So a parts manager would be doing office work, I would believe, or a service manager who has other people reporting to them out in the field would be considered exempt. But if that service manager is sitting in the office, I believe that would also be considered exempt. If it's not a working service manager that would be more like a lead, that person would definitely be non-exempt. That's right. So can a non-discretionary bonus be based on department performance? Yes. But it becomes non-discretionary, again, when it's been promised. So if you say, based upon department performance, you will receive a bonus each quarter or at the end of the year, that becomes a non-discretionary bonus, even though the amount of it has not yet been determined. And some examples of exempt job descriptions, administrative, that might be a single department purchasing agent, single department HR manager, single department buyer, those types of things. Professional would be your controller, your CFO, your attorney, a teacher would be considered, your CPA, anybody who's licensed, a doctor could be considered that professional. The executive would be the managers that manage other people. If they have two or more full-time equivalents, they would be considered that executive job category. And there's also a comment here that certain non-exempt employees might receive commissions or bonuses and all of that is okay. The fact that a non-exempt employee receives a commission or bonus, this new rule does not change that. What happens is whether, if someone is non-exempt because of their duties and because they're hourly, and even if they receive more than the $47,000 a year in terms of compensation, they are still non-exempt because of their duties and their hourly status. So this doesn't, the new rule does not say that non-exempt employees cannot receive bonuses or commissions. And we just got a question explaining IAW, it's actually LAW. You know what, I can easily send you Illinois. If you tell me what state you're in, I'll be more than happy to send those. And if you want to go through, Rebecca, and not do that here in this webinar, that's fine too. If you want to go through AEB and let us know what states you want, we can certainly look that up and send you the Wage Payment and Collection or Minimum Wage Act in those states if they apply. All right. So the next question is whether the salary level, if the salary level test disqualifies 4 out of the 10 managers, do all 10 managers need to be changed? Again, if all 10 people have the same job title and same job description and they're all called manager, the question would be then why are some being paid less than the others? So if the salary level test is disqualifying several people, it may be that they're really doing a different job than your other managers. So you may want to give them a new job title, give them a new job description, and if they are disqualified and you feel they do not earn, they are not eligible to earn the salary, the new salary that is required, then yes, they would be made non-exempt. And if you're going to do that, then if you believe your other managers are truly performing exempt duties, then I think it's time to look at changing the job titles for them and the job descriptions to distinguish them. And if I could chime in on this one and just add that it may be that you have four managers who have been there for maybe a year and you have much more seasoned managers. So just having two levels of managers, like a manager A and a manager B, but then distinguishing in that job description what makes them different. You know, that's the big thing. They have to have, if they have different titles, they also have to have different duties. And yes, great question about non-discretionary bonuses change overtime rate calculations. They absolutely do. And you would need to recalculate minimum, whatever wage you're paying them, their base wage, add that discretionary bonus over that number of hours and then recalculate a new overtime rate. The other thing you can do is if you make that non-discretionary bonus a percentage of gross wages, a percentage of gross wages, then their overtime pay is already included and you don't need to recalculate overtime pay. Great question. So I see we need the Florida and Texas and we'll get on those right away. Okay, it looks like we don't have any other questions coming in. So again, I thank you for participating and if you do have other questions or more specific matters you would like to discuss, then please contact Carla or me and we'll be happy to talk with you about that to deal specifically with the situation you're facing. Mr. Wright is...

video transcript

Department of Labor

exempt employee status

overtime pay

new rules

minimum salary

21st century standards

executive employees

compliance