HR INSIGHTS
NEW WAGE AND HOUR EXEMPTION SALARY LEVELS: COMPLIANCE CONSIDERATIONS FOR NALP MEMBERS
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Richard I. Lehr Lehr Middlebrooks Vreeland & Thompson, P.C.
hough not all landscape and lawn care com- panies deal with issues of unionization, it can be a factor in our industry. The United States Department of Labor, Wage and Hour Division on May 23, 2016, issued final regulations to change the salary level and cal- culation for employees exempt from minimum wage and overtime. Effective December 1, 2016, a person as an exempt Executive, Administrative or a Professional Employee must earn at least $913.00 per week or $47,476.00 annually. Up to ten percent of that annual compensation may be based upon nondiscretionary bonuses or incen- tives which are paid no less often than quarterly. Should the incentive or commission payment result in the employee receiving less than the exempt level for that period of time, the employ- er must make up the difference during the next pay period. The Department of Labor estimates that approximately 4.2 million employees who are cur- rently below the new salary level will either have to be reclassified as nonexempt or receive a pay increase to the $47,476.00 level. The final regula- tions also built in an escalator to that minimum salary, where it will be adjusted every three years based upon the Consumer Price Index. Highly compensated employees, who do not have to meet all of the factors to qualify for exempt status, will have to receive a salary of $134,004.00 effec- tive December 1, an increase from $100,000.00. The following are approaches for NALP mem- bers to consider if employees who are currently exempt but will not meet the salary threshold: 1. The change does not need to occur until De- cember 1, 2016, so those employees who are considered exempt during the current season at a salary lower than the new threshold may continue at that salary until December 1, 2016.
2. There is no requirement for an employer to change the title or job duties of a person who may move from exempt to nonexempt status. Rather, the question is whether the employ- er should increase the pay in order for the individual to remain exempt or change the pay system.
36 THE LANDSCAPE PROFESSIONAL > JULY/AUGUST 2016
3. A pay system that is favored by many in the industry is “fixed salary for fluctuating work- week.” There are some states where it is pro- hibited, so you need to be sure of the status in the state where your employees work. Under this pay system, an employee is still salaried, but overtime is based upon an average of the salary over all hours worked, as opposed to time and a half of an hourly rate. For example, an employee who receives a salary of $500.00 a week but is paid for $250.00 if the employee works 20 hours is effectively paid $12.50 an hour. For a 50 hour workweek, that employee is owed $18.75 per overtime hour or $187.50. On the “fixed salary for fluctuating workweek” program, the employer determines an average hourly rate based upon the total compensation for the week ($500.00) divided by the total number of hours (50) which equals $10.00 per hour. The employer then owes one half of that $10.00 per hour for each overtime hour, or $50.00. Note that with this pay system, if the employee works at all that week, the employee receives the salary for the entire week. Fur- thermore, there must be a written explanation of the pay system to the employee, which the employee understands and acknowledges in writing. This average hourly rate must at least equal the minimum wage (state or local may be higher than the current $7.25 FLSA minimum).
4. Employers may also use a daily rate or an hour- ly rate as a basis to pay the soon-to-be formerly exempt employee, without changing the title.
5. Many employers make certain benefits available based upon classifying an employee as exempt or nonexempt. One approach if you want a currently exempt employee to retain benefits when that employee becomes nonexempt is to classify benefits eligibility based upon job titles, such as Supervisors, Managers, Directors and Officers as opposed to exempt or nonexempt.
6. Be sure if converting an exempt to a nonex- empt status that the employee understands timekeeping responsibilities, what is con- sidered working time, and how overtime is assigned and approved.
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