Q&A about the new federal overtime rule Email
Colorado Green NOW
Wednesday, July 13, 2016 08:00 AM

New federal overtime ruleUPDATE 0816/2016: new questions have been asked/answered and added to this post. 

Recently, ALCC hosted a webinar for members featuring HR consultant Ned Frazier who addressed what landscape companies need to know about the new federal overtime rule.  We compiled some of those questions, and Frazier’s response, below. If you missed the webinar, you can purchase a recording of the full presentation at the ALCC bookstore.

Are there any exceptions to the new DOL rule?
No, there are no exceptions. All employers are subject to compliance, including small businesses with fewer than 5 employees

What is the wage/duties test?
You can view the salary and duties tests at the Department of Labor website to see examples of the tests used to determine whether an employee meets the salary or job duties requirement to be exempt from overtime pay.

What do exempt and nonexempt mean?
An exempt employee is exempt from overtime pay, while a nonexempt employee is eligible for overtime pay.

If you have a family business, are family members exempt from the new DOL rule?
No. Regardless of who they are, if they are on the payroll, you must comply with the new rules of the Fair Labor and Standards Act. Everyone is treated as an employee, so they need to go through the salary and duties test.

Can we use bonuses to push a worker into the exempt classification pay range?
A bonus can only be 10% of total compensation, but only if it is paid out at least quarterly. Annual bonuses cannot be applied to the compensation total.

Duties test vs. wage test - if an employee is making over the salary threshold but is not a manager are they exempt or nonexempt?
The employee is nonexempt. They have to pass both the salary test and the duties test. For example, an employee who makes $60,000 but isn’t a manager is still eligible for overtime.

Can benefit packages be in included in consideration of the yearly wage minimum?
No. Cost of benefits is not a W-2 item so it cannot be counted towards salary requirement. But keep in mind that benefit packages are one of the things you use to attract and retain good employees, so decreasing benefits to help with payroll costs may not be the most effective solution.

When we reclassify we are reclassifying positions, not individuals, correct?
Yes.

Are administrative employees who do not manage other employees exempt or nonexempt?
Again, both the duties and wage test apply—so this is dependent on both. If the employee is making decisions for the company, such as vendor selection, but doesn’t supervise someone and they make more than $47,476 they are exempt. If they do not have a position of responsibility of making decisions for the company, they are nonexempt. If your office manager makes at least $913 per week he/she will be classified as exempt, regardless of the number of hours worked per week.

What is the test for “outside sales?”
If a person is working out of the office most of the time and is calling on customers or prospective customers, they have historically been classified as exempt employees. There is no salary test for this category, which means all outside sales people are classified as exempt employees, regardless of their salary. They must be primarily responsible for making sales or for “obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer” and spend more time on the client’s sites than on the employer’s premises.

Do these rules apply to seasonal, salaried managers?
Yes. During the period (for example, from May throuhg August) you must pay them at least $913 per week to meet the salary test for an exempt employee. You can pay them a salary instead of hourly, but it must meet the $913 standard.

How does this rule apply to me, the business owner? Am I exempt from FLSA?
If the owner has at least 20% equity interest in the company and is actively engaged in the management of the company he/she is considered a bona fide exempt executive. Owners are not exempt from the FLSA.

What kind of reporting is required for this new rule?
No reports are filed. You are always subject to a disgruntled employee or former employee filing a complaint with the Department of Labor and DOL can audit you, with the likelihood of fines and penalties.

Additional resources:

DOL overtime rule FAQs

Overtime Pay Changes Will Affect Employee Benefits, Too

FLSA Overtime Rule Resources

Ned Frazier is founder of Frazier International – HR Consulting. Frazier International is a professional Human Resources consulting organization that serves growing companies that are large enough to require executive-level HR support, but do not require the services of a full time Human Resource professional. Ned can be reached at 303 875-5078 or [email protected].

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