In May 2016, the Department of Labor announced revised regulations which affect the Fair Labor Standards Act’s “white collar” overtime exemptions. The new regulations increase the salary threshold needed to qualify for overtime exemption from $455/week ($23,600 per year) to $913/week ($47,476/year). The DOL has made its first major revision to the long-awaited ruling on overtime exemption rules since 2004. This major change will result in many employees gaining eligibility for overtime pay and force employers to make difficult decisions regarding their employees who have now become overtime eligible. This presentation will provide an overview of the Department of Labor’s new overtime exemption rules including the new salary requirements for exempt employees, options for compliance, and re-classifying employees who are no longer exempt. Are you ready for the December 1, 2016 deadline?

1. Milwaukee | Madison
411 East Wisconsin Avenue | Suite 1000 | Milwaukee, WI 53202 | www.vonbriesen.com
Presented to
HNI Risk Services
16805 W. Cleveland Ave.
New Berlin, WI
September 30, 2016 - 8:00 a.m. – 9:00 a.m.
By Doris E. Brosnan
An Employer Guide: DOL’s
New Overtime Exemption
Rules

2. Overview of Upcoming Changes
• In 2014, Pres. Obama asked Dept. of Labor
(“DOL”) to revise the regulations, which
had not been revised since 2004.
• On May 18, 2016, the DOL released its final
rule.
• The changes relate to the minimum salary
threshold for the salaried exempt status.

3. Review of White-Collar Exemptions
• Salary level test.
• Salary basis test.
• Job duties test.

4. “Salaried exempt” status
• Exempt from minimum wage and overtime
pay requirements.
• What is salaried basis?
– Paid the same amount every week, regardless
of hours worked (with some exceptions).
– Have to meet standards related to job duties.

5. Duties Test - Concepts
• Executive: Managing at least 2 other employees (hiring,
firing, disciplining).
• Administrative: Nonmanual tasks using independent
judgment and discretion.
• Learned Pro: Work which is intellectual in character
requiring the consistent exercise of discretion and
judgment.
• Creative Pro: Work requiring invention, imagination,
originality or talent in a recognized field of artistic or
creative endeavor.

6. Duties Test – Concepts (con’t)
• Computer Professional: computer systems analysts,
computer programmers, software engineers or other
similarly skilled worker in the computer field performing
certain duties.
• Outside Sales: Making sales or obtaining orders or
contracts for services or use facilities AND customarily
and regularly engaged away from the employer’s place or
places of business.
• Highly Compensated: Office or non-manual work and paid
total annual compensation of $100,000 (changing!)

7. New FLSA Rules (eff. 12/1)
• New minimum salary to make the “salaried
employee” exemption increased from $455/week
($23,660/year) to $913/week ($47,476/year).
• Sets the total annual compensation requirement
for highly compensated employees to $134,004.
• Establishes a mechanism for automatically
updating the salary and compensation levels
every 3 years (beginning in 2020)

8. Bonus Can Be Counted (sort of)
• Employers may use nondiscretionary bonuses and
incentive payments (including commissions) to satisfy up
to 10 percent of the standard salary level.
• Incentive bonuses tied to productivity and profitability.
(Retention bonuses, commissions, formula-based)
• MAJOR REQUIREMENT: These bonuses must be paid on a
quarterly or more frequent basis.
• Nondiscretionary is NOT spontaneously decided by
employer.

9. Consequences
• 4.2 million workers are going to now be
overtime eligible (unless they get a pay
raise).
• May especially hurt rural businesses, small
not-for-profit businesses, and local
governments.

10. Federal Court Challenge
• On Sept. 19, 2016, a group of 21 states filed a
lawsuit in federal court in the Eastern District of
Texas challenging the rule.
• The group is led by Texas and Nevada, and it
includes Wisconsin.
• Argument: the new rule will force businesses,
including state and local governments to
“unfairly” increase their labor costs.

11. Federal Court Challenge (con’t)
• State govs. argue that the 10th Amendment
is violated and it will wreck state budgets.
• Challenge to mechanism for automatic
increases every 3 years: violates
Administrative Procedure Act because it is
arbitrary and capricious and does not
follow rulemaking requirement.

12. Conventional Wisdom
• This lawsuit is….very far from certain to
succeed.
• Employers need to assume the rule will go
into affect on 12/1.
• Do not wait for a federal court to stop the
rules.

13. How to Prepare?
• Audit your exempt workforce. Identify
anyone making a salary less than the
thresholds.
• Raise salaries or be prepare to pay
overtime for hours worked over 40 in a
workweek.
• Make everyone keep track of time.

14. Reclassifying Employees
• Work with outside counsel.
• There are pitfalls.

15. Wisconsin Rules
• Don’t forget about Wisconsin’s wage and
hour rules!
• Not enforced against non-profits.
• If there is a difference in favor of
employee, you must follow Wisconsin rule.

16. Duties Test – Wisconsin Difference
• Wisconsin rules impose percentage limits on the amount
of nonexempt work an employee may perform.
• Limit = 20% for most exempt jobs, and 40% for retail and
service establishments.
• Wisconsin also says exemption only applies to overtime,
not minimum wage.
• NOTE: Wisconsin overtime law not enforced against non-
profits.

17. Other Wage and Hour Issues
“Off the clock” work will continue to be the
subject of collective and class actions.
– “Preliminary” and postliminary” time
– “Donning and Doffing”
– Unpaid meal periods that are constantly
interrupted.
– Work from home on digital devices.

18. QUESTIONS???