On May 18, 2016 the Department of Labor released new rules that significantly impact how you pay your employees. Do you know the answer to which employee and which position will be exempt or non-exempt under the new rules? Join us for an overview of the new DOL rules and a demonstration of the new Classification Wizard tool from KPA HRDrive. Using the Classification Wizard will allow you to quickly and easily determine which employees must be paid overtime, which employees must be paid minimum wage for all hours worked, and which employees are exempt from overtime. The Classification Wizard asks you a series of questions to help determine the appropriate employee classification quickly and easily, and also gives you access to certified HR professionals by phone or email at any point in the process. The webinar will be presented by Kathryn Carlson, Vice President of HR Management Products. Kathryn has over 25 years of human resources management experience and is a certified HR professional. For the past 13 years she has focused on developing HR software and programs to improve efficiency, reduce risk, and ensure compliance for companies ranging from small businesses to international.

1. Exempt vs Non-Exempt
Better Workplace
Better Workforce Better World
How to Classify Your Exempt and Non-Exempt
Employees Correctly, and Meet the New
Department of Labor Requirements Webinar
June 15, 2016
"Exempt or Non Exempt? HRDrive Has The Answer

2. KPA: Environmental Health & Safety | HR Management |Sales & Finance Compliance
KPA delivers Environmental Health & Safety, HR Management and Sales & Finance
Compliance programs with a vision of creating a Better Workplace, Better Workforce,
and a Better World. Over 6,500 clients, across 48 states look to KPA as their
compliance partner providing solutions through a combination of innovative software,
interactive training and on-site consulting, resulting in increased production and profits.
A comprehensive solution for Environmental Health & Safety, HR Management,
and Sales & Finance Compliance.

3. Questions
• If you have questions during
the presentation, please
submit them using the
“Questions” feature
• Questions will be answered
at the end of the webinar
•If your question does not get
answered, we will reach out
to you individually

4. Exempt vs Non Exempt
Exempt employees do not receive overtime.
They are paid for the job they do, not the hours
they work. “Guaranteed salary”.
Non exempt employees must be paid for all
hours worked and depending on the position and
the business of the employer they may be entitled
to overtime. “Hours paid for hours worked”.

5. What Changed
• Exemption from Overtime = $47,476 ($913 per week)
More than $455 but less than $913 will need to be reclassified
• No changes to duties test
• 3 year increases
• Ability to include bonuses, commissions and incentive
payments
– 10% of total compensation for non- highly compensated employees if
the incentive payments are made at least on a quarterly basis

6. Avoiding Overtime, Fines and Penalties
• Increase salaries (still must meet the duties test)
• Decrease bonuses for those employees whose overall
compensation exceeds the new minimum. Increase salary by
bonus amount
• Reclassify exempt employees as non-exempt and pay hourly.
• Increase staffing levels to eliminate excessive overtime
The BAD news is that all of these options will require most employers
to spend more money on wage payments
The GOOD news is that you will be in compliance and will not be
subject to lawsuits, fines, and penalties.

7. Federal Exemptions
MINIMUM WAGE/ OVERTIME/
RECORDS
• Executive
• Administrative
• Professional
– Creative
– Computer Relegated
• Highly Compensated
OVERTIME ONLY
Dealership Specific
• Salesman
• Partsman
• Mechanic
• Commission-paid
The FLSA also has an exemption from the overtime pay requirements for certain commission employees of a retail or service
establishment. For this exemption to apply, three requirements must be met: (1) The employee must be employed by a retail or
service establishment; (2) The employee’s regular rate of pay must exceed one and one half times the applicable minimum wage;
and (3) more than half of the employee’s total earnings in a representative period must consist of commissions on goods and
services.

8. Three Factors
1. How is the employee paid?
2. How much is the employee paid?
3. What does the employee do?
• The employee must be paid a salary, must make a minimum of
$913 per week/ $47,476 per year and must meet all of the
qualifications of one of the duties test to be classified as exempt if
using the Executive, Administrative or Professional duties test.
• Highly Compensated employees must perform at least one
exempt duties of an Executive, Administrative or Professional
employee to be exempt.

9. Irrelevant Factors
• Employee is paid a salary- unless meets other
factors for total compensation and duties test
• “We consider employee a manager”
• Employee could supervise someone,
sometimes
• “When employee was hired, we agreed no
overtime would be due”
• “We give them comp time when they work
over 40 hours”

10. EXEMPT
only means that these employees generally
meet all the criteria and are generally exempt
from overtime
NOT EXEMPT
only means that these employees generally do
not meet the criteria for this exemption and
generally are not exempt
WARNING! Job titles are not controlling
CAUTION!

11. The Duties Tests
1. Executive
2. Administrative
3. Professional
4. Outside Sales
5. Highly Compensated Employees
“highly compensated employee” exemption under 29 U.S.C. § 541.601. The relevant section
of the regulation reads: “An employee with total annual compensation of at least $134,004 is
deemed exempt . . . if the employee customarily and regularly performs any one or more of
the exempt duties or responsibilities of an executive, administrative, or professional
employee.”

12. • Is in charge of a department or sub-department,
and
• Supervises the work of two or more full time
employees, and
• Has the authority to hire or fire employees
Executive Exemption

13. • Primary duty is performing non-manual work related to
management policies or general business operations,
and
• Exercises discretion and independent judgment with
little or no supervision (holds a position of
responsibility).
Administrative Exemption

14. Professional Exemption
• Performs work requiring advanced knowledge, defined as work
that is predominately intellectual in character and requires
consistent exercise of discretion and judgement.
• Performs work that requires knowledge of an advanced type in
a field of science or learning that is customarily acquired by a
prolonged course of specialized intellectual instruction.
• Invention, imagination, originality or talent in a recognized field
of artistic or creative endeavor.

15. Creative Professional Exemption
• Invention, imagination, originality or talent in a recognized
field of artistic or creative endeavor.
• Works in a recognized field of artistic or creative endeavor,
including music, writing, acting and the graphic arts.

16. Computer Related Professional Exemption
• Application of systems analysis techniques and procedures,
including consulting with users, to determine hardware,
software or systems functional specifications.
• 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.
• Design, documentation, testing, creation or modification of
computer programs related to machine operations systems.
• OR a combination for the above duties that require the same
level of skill.

17. Outside Sales Exemption
• Making sales
• Obtaining orders or contracts for services or facilities
• Who are customarily and regularly engaged away from the
employer’s place of business(s) while selling or obtaining
orders.
Minimum salary requirements do not apply for outside sales persons

18. • Performs office or non-manual work, and
• Is guaranteed total annual compensation of at least
$134,004 per year, and
• Performs any one of the exempt duties of an
executive, administrative or professional employees
Highly-Compensated Employees

19. HRDrive
Classification Wizard
Overtime Calculation Wizard
Pay Plan Templates
Job Descriptions Templates

20. HRDrive

21. HRDrive Toolkit

22. HRDrive Classification Wizard

23. HRDrive Classification Wizard

24. HRDrive Classification Wizard

25. HRDrive Classification Wizard

26. HRDrive Classification Wizard

27. Calculating Overtime (Premium)
1) Divide amount of salary, bonus,
commission, etc. received in a week by
the hours worked in the week.
2) Then take ½ of that figure times the
number of overtime hours
3) That gives you the additional overtime
(premium) due

28. HRDrive Overtime Calculator Wizards

29. Wage and Hour Consideration
• You can pay commissions weekly, bi- weekly,
semi-monthly or monthly.
• You must satisfy minimum wage on the same
basis: weekly, bi-weekly, semi-monthly or
monthly.
• You can “loan” or advance a sales person money
to cover the minimum wage and then recoup it in
subsequent weeks or months.
• You must pay for all hours worked: sales
meetings, off day deliveries, prospecting, etc.

30. Who is an “independent contractor”?
• Not just because you don’t want to pay overtime or benefits
• Factors to consider:
– The extent to which services rendered by an individual are
an integral part of the principal’s business
– The permanency of the relationship between the individual
and the principal
– The amount of investment in facilities and equipment by the
individual
– The opportunities for profit or loss by the individual and the
method of compensation

31. Time Records
• The employer shall maintain an accurate record of the hours
worked by each non-exempt employee each day and each week
• The employer can delegate this duty to employees, but it
remains responsible for compliance
• No required format: Punched time cards, handwritten time
sheets, computer log, etc., so long as they are accurate
• There is no fine for failing to require employees to keep accurate
records
• However, without good time records, you are at your employees’
mercy
• Most accurate: Punched time card

32. Who is an “independent contractor”?
• Factors to Consider:
– The degree of independent business organization and operation by the
individual
– The degree and nature of control of the individual by the principal
– The degree of independent judgment exercised by the individual who
performs the services
– Performance of the same or similar services by the individual for third
parties in addition to the principal
– Employment of the individual by the principal in any other capacity
– A comparison of the relationship to other independent contractor
operations of a similar nature in the industry
– The right of either party to terminate the relationship on short notice
without penalty

33. Payroll Practices: Red Flags
Watch out for “red flags” regarding payroll practices:
– Improper deductions from salaried employees
– Improper calculation of “regular rate”
– Job descriptions for exempt employees that do
not reflect exempt duties
– Nonexempt employees working through meal
breaks
– Nonexempt employees performing work before
or after they punch or log in/out
– Employees who routinely stay late but have no
overtime
– Not complying with employer’s own written
policies

34. Federal versus State Law
• Federal law does not preempt state
employment laws
• Employees are entitled to the provision
most favorable to them

35. State Wage Law Concerns
1. Higher minimum wages
2. Different or non-existent exemptions
3. Wage payment laws
4. Wage deduction laws
5. “Living wage” laws

36. Irrelevant Factors
• Employee is paid a salary- unless meets other
factors for total compensation and duties test
• “We consider employee a manager”
• Employee could supervise someone
sometimes
• “When employee was hired, we agreed no
overtime would be due”
• “We give them comp time when they work
over 40 hours”

37. Common Classification Mistakes
• Not considering differences in state and
federal salary and duties tests
• Treating trainees as exempt before they fully
qualify as exempt
• Failing to guarantee the proper minimum
salary
• Prorating the salary of a part-time exempt
employee to less than $913/week
• Making improper deductions from salaries of
exempt employees

38. Questions and Answers
38– KPA CONFIDENTIAL –
QUESTIONS?

39. Contact Information
www.kpaonline.com
kcarlson@kpaonline.com
866-356-1735