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Department of Labor Exemption Proposal &
Other Laws Affecting DIDD Providers
Asia N. Diggs, Esq.
General Counsel, Dir. of Compliance & Human Resources
asiadiggs@meritan.org
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WHITE COLLAR EXEMPTION
CHANGES
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With the new wage and hour changes looming on
the horizon, DIDD employers need to ensure that
appropriate steps are taken to minimize potential
risk and liability.
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Violation of the FLSA =
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WHAT IT COULD COST YOU
1. Unpaid minimum wages
2. Unpaid overtime
3. Liquidated damages (equal to the amount of #1 and/or #2)
4. Costs
5. Reasonable attorneys’ fees
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SO WHAT DOES THE FLSA WANT US TO DO???
1. Pay the Federal or State MINIMUM WAGE (whichever is higher) for each hour
worked.
TN: $7.25 (no law)
MO: $7.65
AR: $7.50 4+ees
KY: $7.25
WV: $8.00
VA: $7.25
NC: $7.25
GA: $5.15/$7.25
AL: $7.25 (no law)
MS: $7.25 (no law)
OH: $8.10
Federal: $7.25
2. Pay overtime to non-exempt employees at the rate of 1.5 times the regular rate
of pay for any hours worked over 40 in a workweek
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WHAT IF YOU DON’T WANT TO PAY OVERTIME
You must ensure that the relevant position meets
two tests to qualify for an overtime exemption.
1. Salary Test
2. Duties Test
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CAVEATS ABOUT FLSA EXEMPTIONS
-Every employee is NOT exempt
-Paying someone a “salary” does not automatically
make them exempt
-The employer is presumed to be “doing it wrong” and
the employee is actually entitled to minimum wage
and overtime – all of which is on the employer to prove
otherwise.
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SALARY AND SALARY BASIS – AS IT EXISTS
TODAY
29 C.F.R. § 541.602
Salary basis means the employee “regularly receives, each pay
period…a predetermined amount [$455/week] consisting all or
part of the employee’s compensation…not subject to reduction
because of variations in the quality or quantity of work
performed.”
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CAUTION: IMPROPER DEDUCTIONS!!!
If you want to preserve the FLSA exemption, ensure that you are only
making the following deduction:
 A whole day absence for illness/disability if employer has bona fide
sick/disability plan
 A whole day absence for personal reasons other than illness or accident
 Absence for any time period covered by FMLA
 Absence due to disciplinary suspensions for workplace safety rules of
major significance or workplace conduct rules (Ex: violence,
discrimination, etc.)
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SALARY BASIS: AS IT “MIGHT” BE
-To meet the salary basis portion of the exemption tests,
employers will need to increase the current predetermined weekly
amount ($455/week to $970/week)!
-If an employee does not make at least $970/week ($50,440/year),
the person fails the first test and you can not consider the duties
performed by the employee. This employee is NOT exempt.
DO NOT PASS GO, DO NOT COLLECT $200
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WHAT IS THE DOL THINKING?!?!?
-Over 21 million employees affected by proposal
-Non-profit, social services, small businesses and
government entities are left high and dry
-Proposal is drafted to increase the
predetermined salary amount each year
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DOL RATIONALE
-Most W/H practitioners would agree that the current
weekly rate is low and should be modified
-In the past, the DOL relied on weighted data in
determining the salary levels that would serve as the
predetermined threshold for exemption.
-This minimized the impact on depressed regions and
industries.
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DOL RATIONALE (cont.)
-The proposed amendment changes this approach of
using weighted data, and instead looks at BLS data
related to the compensation of ALL American salaried
employees – without regard to depressed regions and
industries.
-New salary level represents the 40th percentile of
earnings for all full-time salaried workers throughout
the U.S.
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DUTIES TEST
 The duties test requires that the individual’s job duties
primarily involve executive, administrative, and
professional duties as defined by DOL regulations.
 Job titles do not matter!!! Actual duties as performed
along with how the particular job tasks fit into the
employer’s overall operation matter.
 Persons who hold the same job title may be classified
differently.
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EXEMPTIONS
 Executive: 29 C.F.R. § 541.100 - § 541.106
 Administrative: 29 C.F.R. § 541.200 - § 541.204
 Professional: 29 C.F.R. § 541.300 - § 541.304
 Computer Professional: 29 C.F.R. § 541.400 - § 541.402
 Outside Sales: 29 C.F.R. § 541.500 - § 541.504
 Highly Compensated Employee - 29 C.F.R. § 541.601
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DOL ON DUTIES
 The DOLS’s proposed amendments do not specifically propose changes to the
duties test.
 Asked for comments regarding changes to the duties test (considering changing):
 What changes, if any should be made?
 Should employees be required to spend a minimum amount of time performing
work that is the primary duty to quality for the exemption?
 What should the minimum time spent be?
 Should California’s 50% rule be adopted?
 Over 250,000 comments received during comment period
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DOL ON DUTIES
 Pre-2004 Long and Short Tests were a series of
questions to help determine exemption status.
 One major difference between the long and the short
was that the long test required the employer to
confirm that the employee devoted no more than 20%
of weekly hours to work not closely related to the
primary duty (or otherwise performing non-exempt
duties).
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DOL ON DUTIES
How can the DOL create final regulations
regarding the duties test that were never
proposed?
Logical Outgrowth Doctrine – a proposed rule
may differ from the final rule so far as the final
rule is a logical outgrowth of the former
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IMPACT
Historically, nonprofit, social services, and
government sector jobs pay lower wages, but
higher benefits in the workplace.
Fewer white collar employees being treated as
exempt – now eligible for overtime. (Ex: Case
Managers, other exempt office personnel, etc.)
Small businesses unable to survive.
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IMPACT
Employers forced to create a part-time
workforce to avoid overtime.
States may increase their thresholds.
Disproportionate impact on certain regions and
industries. (Ex: social services, non-profit,
government, retail, restaurant, etc.)
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BOTTOM LINE
Employers will be required to perform a
wage/compensation audit of all currently
exempt employees making $55,000 or less.
These audits and reclassifications will need to be
performed frequently, possibly annually or
every two years.
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WHAT MIGHT THE AUDIT LOOK LIKE?
 Determine who is classified as exempt and earns $55,000 or less.
 Perform a job analysis that includes the following:
1. Review minimum qualifications established for the job, including
education, on-the-job training and experience.
2. Review prior job descriptions, job questionnaires, and related
documentation.
3. Confirm with managers that duties and qualifications are accurate.
4. Conduct workflow reviews—a useful tool in ascertaining job functions,
processes, job boundaries and organizational operations. Schematics and
charts can also prove to be helpful.
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WHAT MIGHT THE AUDIT LOOK LIKE? (cont.)
 Perform a job analysis that includes the following:
5. Gather organizational charts for departments and positions being
reviewed.
6. Review policy manuals to determine functional autonomy of positions.
7. Gather prior performance reviews which document duties and
responsibilities or respective positions.
Resource: FLSA Exemptions Flow Chart, SHRM,
http://www.shrm.org/TemplatesTools/Toolkits/Documents/FLSAExemptionsFlowchart.pdf
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WHEN WILL THE NEW EXEMPTION
REGULATIONS GO INTO EFFECT?
No one knows, but it is suspected in the late
winter of 2015 or first quarter of 2016.
Employers will have 60 days after publication of
the Final Rule to comply.
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CHANGES TO COMPANIONSHIP
EXEMPTION
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COMPANIONSHIP EXEMPTION -THEN
 FLSA, as originally enacted, only covered domestic service workers if they worked for a
covered enterprise, i.e., an agency or business subject to the FLSA or were an
individual engaged in interstate commerce, an unlikely occurrence.
 Two exemptions carved out in DSW category where no minimum wage or overtime
required:
1.
2.
Casual babysitters and Companionship services for individuals who (because
of age or infirmity) are unable to care for themselves 29 U.S.C. 213(a)(15); and
“Any employee who is employed in domestic service in a household and who
resides in such household.” 29 U.S.C. 213(b)(21)
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LEGAL HISTORY
 10/13/13: Final Rule issued; scheduled to take effect 1/1/2015
 6/2014: Association of home care companies filed a lawsuit in federal court challenging the Final Rule
 10/9/14: DOL announced delay in enforcement regarding companionship exemption for 6 months from
1/1/2015-6/30/2015
 12/2014 and 1/2015: U.S. District Court Judge Richard Leon of D.C. Circuit issued opinions and orders
vacating the Final Rule’s revised third party regulation and revised definition of companionship services,
respectively.
 2/20/2015: The Department of Labor appealed the district court’s orders to the U.S. Court of Appeals for
the D.C. Circuit. Home Care Association of America v. Weil, No. 15-5018 (D.C. Cir.).
 3/30/15: Plaintiff-Appellees (home care association) filed appeals brief in response to DOL
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LEGAL HISTORY (cont.)
 8/21/15: Court of Appeals issued a unanimous opinion affirming the validity of the Final Rule and reversing the
district court’s orders; Decision to become effective 10/13/15
 The home care associations asked the Court of Appeals and the Chief Justice Roberts of the U.S. Supreme
Court to delay the date the Court of Appeals opinion would become effective, but both requests were
DENIED.
 10/13/2015: Final Rule became effective
 11/12/15: DOL will begin enforcement of the Final Rule
 November 12 - December 31, 2015: DOL will exercise prosecutorial discretion in determining whether to bring
enforcement actions, with particular consideration given to the extent to which States and other entities have
made good faith efforts to bring their home care programs into compliance with the FLSA since the
promulgation of the Final Rule.
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COMPANIONSHIP EXEMPTION -NOW
Several significant changes from the prior regulations, including:
(1) the tasks that comprise “companionship services” are more clearly
defined;
(2) the exemptions for companionship services and live-in domestic
service employees are limited to the individual, family, or household using
the services; and
(3) the recordkeeping requirements for employers of live-in domestic
service employees are revised.
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COMPANIONSHIP EXEMPTION -NOW
 Minimum Wage and Overtime Protections: Prohibits third party employers,
such as home care agencies, from claiming the companionship or live-in
exemptions.
 Companionship Services: The provision of fellowship and protection for an
elderly or infirm person who requires assistance in caring for himself. Care
must be attendant to and in conjunction with the provision of fellowship
and protection and not exceed 20% of the total hours worked by person per
workweek.
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COMPANIONSHIP EXEMPTION –NOW
 Medically Related Services. Companionship services definition doesn’t include the
provision of medically related services typically performed by trained personnel.
Performance of medically related tasks during the workweek results in loss of the
exemption.
 Live-In Domestic Service Employees. Live-in domestic service workers who reside in the
employer’s home permanently or for an extended period of time and are employed by
an individual, family, or household are exempt from overtime pay, although they must
be paid at least the federal minimum wage for all hours worked. Live-in domestic
service workers who are solely or jointly employed by a third party must be paid at
least the federal minimum wage and overtime pay for all hours worked by that third
party employer.
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COMPANIONSHIP EXEMPTION –NOW
 Third Party Employers. Third party employers of direct care workers (such as home
care staffing agencies) are not permitted to claim either the exemption for
companionship services or the exemption for live-in domestic service employees.
 Paid Family or Household Members in Certain Medicaid-funded and Certain Other
Publicly Funded Programs Offering Home Care Services. FLSA does not necessarily
require that once a family or household member is paid to provide some home care
services that all care provided by that family or household member is part of the
employment relationship.
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IMPACT
 Every 3rd party employer that employs workers in the field of personal
care, home care, or personal aid needs to take efforts to comply with
new overtime requirements.
 Any employer who has a live-in model for home care needs to ensure
minimum wage and overtime requirements are being met.
 Travel time, where applicable, will need to be factored in as timeworked for employees who service more than one client in a day.
 Over 2 million home care workers expected to be impacted.
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DANGER ZONE
Because the Final Rule was issued in October
2013 with an original effective date of January 1,
2015, no one yet knows whether plaintiffs (i.e.,
employees) can pursue claims for unpaid
minimum wage and overtime from alleged
violations of the Rule dating back to January 1,
2015.
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BOTTOM LINE
 Home care agencies should be making every effort to comply on or before November
12, 2015.
 Ensure that non-exempt employees, including live-ins, are paid at least the hourly
minimum wage and earn overtime when applicable.
 Reinforce policy that all time must be recorded and reported to the employer
(including meal and travel time, where applicable).
 Train ALL employees on timekeeping procedures, what are considered “hours
worked,” prohibition against off-the-clock work, travel time and sleep time.
 Employ a publicized multi-faceted mechanism that allows employees to report noncompliance (i.e., hotline, HR, or other managers).
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OTHER LAWS TO NOTE
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1. Mandatory Paid Sick Leave for Employees of
Government Contractors
 https://www.whitehouse.gov/the-press-office/2015/09/08/executive-orderestablishing-paid-sick-leave-federal-contractors
2. Broader Joint-Employer Standard
3. Independent Contractor Misclassifications
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THANK YOU!!!