The SESCO Report – April 2019

DOL Issues New Salary Level for Exemption from Overtime

On March 7, 2019, the United States Department of Labor (DOL) released its long-anticipated replacement for the Obama administration's controversial overtime rule, increasing the salary threshold for employees to qualify for exemption from overtime under the white-collar exemptions from $23,660 to $35,308 per year. The weekly equivalent increase is $455 to $679. This new guaranteed salary level to be exempt under one of the "white-collar" exemptions is effective January 1, 2020.

Under the "white-collar" exemptions of the Fair Labor Standards Act, Executive, Administrative, Professional, Outside Sales and Computer Employees, as defined, are exempt from recordkeeping and overtime requirements of the law if the position satisfies two (2) tests:

  1. The guaranteed salaried basis test — $35,308 per year January, 2020.
  2. Meets the exemption duties test.

Caution: To be exempt from minimum wage, overtime and recordkeeping obligations, both of the tests as noted above must be met. Simply guaranteeing a position $35,308 per year does not mean that the position is exempt from overtime.

As we recall, under the Obama administration's 2016 rule, the guaranteed salary basis was going to be increased to $47,476 per year more than doubling the current standard of $23,660. A federal district court in Texas enjoined the DOL from implementing the rule, and in August 2017, that same court granted a motion for summary judgment against DOL and invalidated the rule. This history is important, as the 200 plus page proposed rule goes to great lengths to explain how the Trump DOL has attempted to craft the new rule to come within the guidelines laid out by the court in that case.

The rules proposed on March 7th, which will come into effect on January 1, 2020 include the following:

  • Salary level: $679 per week/$35,308 annually
  • Non-discretionary bonuses, incentive payments and commissions: The rule allows employers, for the first time, to count non-discretionary bonuses, incentive pay and commissions to satisfy up to 10% of the $35,308 salary level test. Non-discretionary bonuses are bonuses and incentives to include commissions that are communicated and subsequently "earned" based on an employee's performance, attendance or other criteria. A completely discretionary bonus (which cannot be counted against the salary level) is a bonus granted upon an owner's or manager's discretion such as a Christmas bonus or other type of "gift."
  • Catch-up payment: The proposed rule will permit employers to make a single "catch-up" payment after year's end to bring an employee's compensation up to the required level. Under this aspect of the proposal, an employer must pay the exempt employee at least 90% of the salary level (at least $611.10 per week); at the end of the year, if the salary paid plus non-discretionary bonus, incentive and commissions paid do not equal $35,308, the employer will have one (1) pay period to make up the short fall (up to 10% of the salary level, or $3,530.80).
  • Highly-Compensated Employee threshold: The proposed rule seeks to increase the Highly-Compensated Employee exemption to $147,414 annually, of which at least $679 must be paid weekly. The difference will be in a "catch-up" payment as applies to non-HCE positions.

Impact on Your Business

If you are currently paying exempt, salaried personnel less than $35,308 per year, you will need to consider the following options:

1. Increase the position's guaranteed salary January 1, 2020 to at least $35,308 per year or a combination of salary plus commission. Under the salary plus commission opportunity, the salary must be at least $31,777.20 annually/$611.10 per week plus a non-discretionary bonus, incentive or commission of at least $3,530.80 or a catch-up payment at the end of the year to ensure that the minimum salary threshold is met.

2. Change the pay plan from an exempt position and implement a non-exempt pay program such as hourly with time and one-half (150%) the regular rate for hours worked over 40.

3. Implement the Fluctuating Workweek Method of Payment. The current salary would continue as is (less than $35,308 annually) with an additional "one-half" overtime payment for hours worked in excess of 40 hours per week. The fluctuating workweek is a non-exempt pay plan wherein you are allowed to provide a guaranteed salary with additional half-time payments at 50% versus 150% (time and one-half) for hours over 40.

SESCO Staff Recommendations

Before you make any pay plan changes, you have eight (8) months to implement the following plan:

1. For those exempt positions making less than $35,308, have these employees maintain an accurate record of time worked on a daily basis.

2. Monitor the hours of work to determine how much, if any, overtime is worked in excess of 40 hours per week.

3. Understanding the potential overtime liability will allow you to determine whether or not it's more cost effective to place the employee on an hourly with time and one-half pay plan over 40 (position does not work much, if any, overtime) or increase the salary to maintain an exempt pay plan (works a lot of overtime over 40).

4. Consider the Fluctuating Workweek Method of Payment should an increase to $35,308 not be affordable and the position works a lot of overtime or you wish to continue a salary pay plan.

SESCO retainer/service agreement clients receive an annual human resource and employment law audit. This should be scheduled immediately to determine the potential impact of this legislation on your exempt/non-exempt pay plans. These audits can be conducted on or offsite.

If you are not a retainer client, please contact SESCO to explore our monthly fees which will provide ongoing services to include the following:

  • Unlimited telephone, email, research on a daily basis (no time limit)
  • Annual human resource/employment law audit with follow-up report
  • Annual required harassment training
  • Federal and state posters as required
  • Annual employee handbook review
  • SESCO Report/newsletter
  • Weekly email updates
  • Priority service at reduced fees

These monthly service agreements start as little as $40.00 per month based upon the number of employees as well as specific needs requested.

Contact SESCO at 423-764-4127 or sesco@sescomgt.com.

Control Abuse of Intermittent FMLA Leave

Employees are becoming well versed in utilizing FMLA leave as provided under federal law for employers who are covered. As we know, employees are allowed to take up to twelve (12) weeks of leave for their own or a family member's serious health condition and up to 26 weeks for military care giver leave. Leave can also be taken on an intermittent basis such as in per-hour or half-day increments. In fact, unscheduled intermittent leaves now account for a huge portion of all FMLA leaves of absence. Although the law does allow employees to take FMLA leave in short times for leaves such as a doctor's visit or to care for a sick relative, it doesn't give them unfettered rights to random work breaks or to arrive late without good excuses.

SESCO recommends the following suggestions to rein in the use of intermittent leave.

1. Question the certification. If an employee submits certification for a chronic condition that may flare up and require intermittent leaves such as asthma or migraines, you could:

1) if the certification is not completed in its entirety or is vague, you should ask the employee to provide complete and sufficient information.

2) contact the healthcare provider to ensure that they actually prepared the certification and to clarify any handwriting or the meaning of any response. However, you must use a human resource professional, healthcare provider, leave administrator or management official to make that contact. An employee's supervisor should not be the one who contacts the healthcare provider.

2. Ask for a second opinion. If you have reasons to doubt the validity of the certification, you can always ask and pay for a second opinion. The physician may be of your choosing and, again, it is your responsibility to pay for this opinion. If the second opinion conflicts with the first, you can pay for a third assessment. The third provider's opinion would be the "tie breaker."

3. Ensure that all absences related are counted. The key in managing intermittent leave is not after an employee submits a certification that calls for sporadic health-related absences. It's important that you count all absences related to the condition as FMLA entitlement. Managers and supervisors must be the eyes and ears of the organization and should pass along information about FMLA-covered intermittent absences to human resources or office administration.

4. Require employees to follow your paid leave policy. It is suggested that you require employees to use paid leave time as part of their intermittent FMLA absences. This will prevent employees from taking paid leave after their FMLA leave expires, thereby extending their leaves of absence beyond the FMLA entitlement.

5. Request recertifications. The Act offers a number of opportunities to seek recertifications of the need for FMLA leave, including intermittent leave. You can request recertification anytime an employee seeks to extend an existing FMLA leave. Also, you can request recertification every 30 days in conjunction with absences related to long-term conditions.

If the employee is taking a solid block of leave for more than 30 days, you can ask for recertification if the leave extends beyond the requested leave period.

6. Follow-up on changed or suspicious circumstances. You should always actively manage use of FMLA leave to include paying attention to suspicious patterns of intermittent leave usage. You may seek recertification more frequently than 30 days if the circumstances described by the existing certification have changed, or if you receive information that casts doubt on the employee's stated reason for the absence or on the continuing validity of the certification.

7. Control how employees schedule planned treatments. Employees may take intermittent leave for treatment, therapy and doctor visits for serious health conditions. FMLA regulations specifically require that employees schedule those absences for planned medical treatment in a way that least disrupts your organization and operations. When you receive a request for this type of intermittent leave, communicate with employees about the frequency of the treatment, the office hours of their physician and ways the employee may be required to alter their schedule to cut down on disruptions.

8. Consider temporary transfers. If the need for intermittent leave is foreseeable, you may transfer the employee during the period of the intermittent leave to an available alternative position for which the employee is qualified and which better accommodates the recurring periods of leave. Although the alternate position must have equivalent pay and benefits, it does not have to provide equivalent duties. If the employee seeks to use leave in order to work a reduced work schedule, you may also transfer the employee to a part-time role at the same hourly rate as the employee's original position, as long as benefits remain the same.

SESCO has prepared customized FMLA compliance forms and kits and also sells a guide to complying with the FMLA to include staff recommendations and sample policies. Contact SESCO should you wish to order our forms and/or compliance manual.

Welcome New Staff Consultant, Lisle Whitman

SESCO is pleased to announce our new staff member, Lisle Whitman. Lisle is a native of Bristol, TN. He graduated from Union University in Jackson, TN with a degree in Business Administration with a concentration in Economics. While at Union, his academic research included forecasting, modeling, and simulation.

Lisle was previously employed by K-VA-T Food Stores, Inc. in Abingdon, VA as a Consumer Research Analyst where he analyzed consumer opinions and behavior to drive store improvement and marketing strategies. Lisle will be working and traveling out of the Bristol office as a generalist consultant. Please join us in welcoming Lisle—lisle@sescomgt.com.

SESCO Client Feedback

Human Resources: The Basics

"I learned new things that I was not aware of that I could go back and correct at work."

"Great information with lots of examples."

Special Thanks to New SESCO Clients!

Toole's Garage
San Carlos, CA

Peninsulas EMS Council, Inc.
Gloucester, VA

Carter Meyers Automotive
Charlottesville, VA

First Bank & Trust
Abingdon, VA

Strictly Diesel
Phoenix, AZ

Sterling Motorcars
Sterling, VA

Braswell and Sons
Little Rock, AR

Featured SESCO Client

American Supply Association

SESCO is proud to be retained by the American Supply Association. ASA retains SESCO for its valued members. Members can contact SESCO on a daily or as needed basis without charge to discuss human resource and employment law matters.

The American Supply Association is a national organization serving wholesale distributors and their suppliers in the plumbing, heating, cooling and industrial piping industries. There is a total of 292 wholesale members conducting business out of 3,495 locations.

Thank you ASA!

Sesco's Spring Seminar Series 2019

Human Resources for the Advanced Professional
May 7-8, 2019 Bristol, VA
May 14-15, 2019 Richmond, VA

Richmond, Virginia Location:
Virginia Community Healthcare Association (VCHA)
3831 Westerre Parkway
Henrico, VA 23233-1330

Bristol, Virginia Location:
Courtyard by Marriott
3169 Linden Drive
Bristol, VA 24202

This 2-day seminar focuses on understanding the importance of diversity and generational differences in the organization, developing and implementing proper compensation practices tied to performance criteria, recognizing how to properly handle internal investigations to best protect the organization, designing internal training and development programs for staff, reviewing various employment regulations and recent trends.

(SESCO has partnered with one of our valued clients, Virginia Community Healthcare Association, to host our Richmond Seminar Series.)

Visit our website at www.sescomgt.com

State and National Business and Trade Associations, Chambers of Commerce and Human Resource Associations are welcome to contact SESCO to book a professional speaker for annual conventions and seminars. Contact Bill Ford at 423-764-4127 or by email bill@sescomgt.com.