Labor issues

Working overtime: How new FLSA regulations will affect your workplace very soon

With Ed Bergmann, partner, and Camille Olson, partner, Seyfarth Shaw LLP

Posted

WTF is FSFW?

It provides for having salaried non-exempt employees paid on a Fixed Salary for Fluctuating Workweek. It’s all in 29 CFR 778.114, folks. Um, Let’s let Ed Bergmann explain:

Here’s how to calculate overtime for employees paid a FSFW:

Weekly salary divided by total hours worked in the overtime workweek times .5 times the number of overtime hours worked in the workweek. The resulting figure is the overtime increment for the workweek and should be added to the weekly salary to determine total compensation due to the employee for that workweek.

Example: Assume a weekly salary of $800 and 50 hours worked in the week, and the calculation is as follows: $800 divided by 50 hours times .5 ×10 = $80; $80 added to $800 equals $880 which is the total compensation due the employee for the week. ($800 divided by 50 equals $16 times .5 equals $8 times 10 overtime hours equals $80)

What’s not changing for exempt employees: The duties, such as management and supervisory roles, and the way salary is paid, that is, a fixed sum no matter how often or how much he/she works.

What is changing: The minimum compensation level to make a case for exempt status. “We have not seen this change since the 1960s,” Bergmann notes. The minimum salary for an exempt employee is $913 a week, or $47,476 annually, and again, no matter how often or how much he/she works.  

Are you ready for these changes? Have you audited your employee salaries? How many employees may have to be reclassified based only on their salary level? For instance, are employees making, say, $800 a week doing exempt-like work?

And then take action. If people doing exempt work are close to the $913 week level, consider raising their salary, especially if they are in line for a raise anyway. Another option: Transition the employee to FSFW.

The circulation district manager problem. DMs were traditionally considered exempt because of the so-called motor carrier exemption for employees who deliver the paper. That’s gone away. And there are problems with the traditional exemption for delivery for missed stops. The Department of Labor has recently taken the position that delivery should be nearly 100% of a DM’s duties to remain exempt.

So what should you be paying your DMs? Many newspapers are saying, we’ve always treated DMs as exempt and we’re going to be sure they are exempt as administrators or have duties to make deliveries a substantial part of their duties. Other newspapers are converting their DMs to hourly employees rather than risk litigation with DOL after an audit.

You asked: Can we calculate the hourly rate of an exempt employee’s salary to categorize the employee as an hourly employee? Quick answer: Yes, as long as that will be essentially a permanent change. 

Other conundrums: Your newspaper is likely to have employees who do both exempt and non-exempt work, for instance, an editor who also works as a reporter. If they’re not making $913, then you’ve got an issue. But if they making more than the $913 threshold, it’s not an issue because you can always ask an exempt employee to do non-exempt work as long as that’s not their primary duty. 

Another mix-and-match: What about an employee who has exempt-status benefits, such as a longer vacation or better insurance package? Some employers are “red-circling” these employees, telling them they are exempt for benefits, but are hourly employee when it comes to overtime.

The employees’ question you can see coming a mile away: Hey, if you’re raising my pay to this level now, why wasn’t I paid this all along? Seyfarth Shaw’s advice: Tell them that prior to Dec. 1 no company in America was required to pay overtime up to these salary levels. 

What we talk about when we talk about reclassification: Seyfarth Shaw’s expert labor attorneys suggest talking one-on-one with newly hourly employee. Bergmann: “Say, you are going to be changed to non-exempt because of a change in the law. You are important to us. Be candid, explain that we have no control over this. But we will do it in the fairest, most efficient manner with the least amount of impact on employees in terms of compensation.”

More employees are going hourly. Now what? First, don’t wait to see what happens Dec. 1. Figure out now how many hours are these soon-to-be hourly employees really working, and what a change to hourly with overtime will do to workflow. 

Another question you have to ask yourself: How are you going to train hourly employees to record all the hours they are really working? That’s important because unreported hours means unpaid OT—and that could mean double or even triple payouts under DOL sanctions. Have a written procedure for recording hours.

So…Tell your new hourly people if they’ve got a half-hour for lunch, they’ve got to take it. Tell them we no longer want you texting or on social media for work purposes at home or after hours.

A small exemption…For newspapers with circulations below 4,000—never mind. You’re not subject to these new federal overtime pay rules. But—and you knew there’d be a but, right?—be aware that not all states have that small paper  exemption.

Counselors, approach! To follow up with Ed Bergman, email him at ebergmann@seyfarth.com or call 312.460.5807, and to To follow up with Camille Olson, email her at colson@seyfarth.com or call 312-460-5831. Seyfarth Shaw LLP’s website is www.seyfarth.com 

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