What You Don’t Know About a New Employee Can Hurt You

As employers, agency owners need to be aware of the ways they can get in trouble due to the actions of their employees.  Many owners are probably aware that they can be held liable for acts of their agency’s employees committed while performing their duties on behalf of the agency.  This legal concept is known as vicarious liability, or respondeat superior.  It is the reason why all employers should adopt policies regarding the use of cell phones by their employees while driving a motor vehicle on agency business. (click here to find out what happened to a Georgia employer whose employee was looking for their cell phone when they ran into the back of another motor vehicle)

However, vicarious liability is not the only way that an agency can be held liable for the acts of its employees.  Such liability is possible even when the acts constitute a crime, as Avis Rent a Car recently found out.  In early May, a judge in Gwinnett County found that Avis was liable for $38.5 million of a total of $54 million in damages awarded by two juries to two persons who were injured when an Avis employee stole a rental car and then ran into them.  Even though the employee was engaged in criminal conduct when the accident occurred, Avis was held liable for the consequences of that conduct because it failed to properly check the background of the employee before he was hired.

If Avis had done so, it would have found the employee had been convicted of stealing cars and eluding the police.  As the employee himself told one jury, “Just like you won’t have a sex offender watch kids”, you don’t hire a person who has been convicted of stealing cars to take care of cars.  The legal concept underlying Avis’ liability is known as negligent hiring, and an employer can also be held liable for negligent supervision or retention of an employee.

If you ask a potential new employee for references, all the references provided should be checked.  A criminal background check should be run, if the employee will have access to agency or customer funds or other property.   Appropriate corrective action should be taken, if the employee does something or fails to do something that could have resulted in injury to a customer or other third party or their property.  If it happens again, it may be time to consider ending the employment relationship.

The law in this area focuses on what a reasonable person in the position of the employer would have done under the same circumstances.  That should be the guiding principle for agency owners in hiring and supervising their employees when injury to customers or other third parties is possible due to an employee’s act or failure to act.

 

 

Summer Interns – It’s That Time of Year Again

With Memorial Day weekend, the unofficial start of summer, fast approaching, it’s a good time to go over the rules regarding the use of interns.  Nothing of significance has changed since my post on this subject last year, but it never hurts to refresh one’s memory, as a business that violates these rules can find itself in trouble with the U.S. Department of Labor (the “USDOL”) and potentially, the IRS.

The issue that poses the biggest risk of trouble for an agency is whether an intern will be compensated and if so, how much compensation they will be paid.

If an agency does not want to pay an intern for their services, the burden is on the agency to prove that the intern is a “trainee”, who does not have to be paid anything for their services, and not an “employee”, who must be paid at least the minimum wage for their services.  The same burden must be met if the agency wants to pay an intern less than the minimum wage for the hours worked by the intern.  That burden is higher for an agency or other profit-making business because the USDOL, which is responsible for enforcing the minimum wage law, will presume that such an intern is an “employee”.   The USDOL has issued a Fact Sheet in which it establishes six criteria that must be met to prove an intern is a “trainee.” (Click here for an article I have written that discusses those criteria.)  The bottom line is that if the agency derives any significant benefit from the services of an intern, that intern will most likely be considered an “employee” by the USDOL for purposes of the minimum wage law.

It does not matter that the intern willingly agreed to perform the services in question without pay or for less than the minimum hourly wage, as the United States Supreme Court has held that an individual can not waive their rights under the minimum wage law. Thus, an intern could decide, up to three years later, that maybe they should have been paid the full minimum wage for all the services they performed for the agency.  A successful claim could result in the intern receiving up to twice the amount of compensation they should have been paid and will result in the agency paying the intern’s attorney fees and other expenses of litigation.

For an agency that is considering hiring someone who is under 18 years of age, both the federal and state governments impose restrictions on the types of activities in which such a person can engage and for how long each day, regardless of whether they are a “trainee” or an “employee.”  The main difference between the two sets of restrictions is that Georgia law requires a person under 18 to get an employment certificate, or work permit, from the school they last attended or the local county school superintendent.  (Click here for a fact sheet from the USDOL on this subject and here for a summary of the restrictions imposed by federal and state law from the Georgia Department of Labor.)  For agency owners who want to give their children a taste of what it’s like to work in the agency, only the restrictions on prohibited occupations will apply.

A summer internship can be beneficial for both the intern and the agency, but to avoid trouble, the agency needs to know and follow the above rules.

BEST WISHES FOR A SAFE AND ENJOYABLE MEMORIAL DAY WEEKEND.

Employment Termination Notice Periods – Are They Enforceable? (Part 2)

My last post addressed the enforceability of employment termination notice periods from the perspective of the employer.  Unfortunately for the employer, when an employee quits without providing the required notice, there is not much the employer can do beyond prohibiting the employee from acting contrary to the interests of the employer during the required notice period.  Is an employee who is fired without being given the required prior notice in a similar position?

The answer depends on what effect a termination of the employee’s employment has on their right to receive post-employment compensation.  The Georgia appellate courts have held that the failure of an employer to give the required notice of termination to an employee entitles the employee to sue the employer for breach of contract.  But the employee’s only remedy is payment of the compensation and other benefits that would have been paid or provided to them during the required notice period.  The employee cannot get their job back.  However, such a breach of contract by the employer will void any provision in the employment agreement that restricts the right of the employee to receive compensation they have already earned after their employment terminates.

In one case, the Georgia Court of Appeals refused to enforce a provision in an employment agreement that limited the improperly terminated employee’s right to receive commissions for sales made to those that were received by the employer within 10 days after the termination of the employee’s employment.  In another case, the Court of Appeals refused to enforce a provision that reduced the amount of commissions the improperly terminated employee was entitled to receive after their employment was terminated.  Any attempt to avoid the payment of a bonus or other compensation that involves the improper termination of an employee will also fail.

Since an employer will have to pay an employee the compensation and provide the benefits the employee would have been entitled to receive during any required termination notice period, there is no reason not to take advantage of such a period to do what can be done to make the employee’s departure as painless as possible.  Where there are contractual provisions that restrict an employee’s right to receive compensation they have already earned after their employment terminates, it is imperative that any required notice of termination be properly given.  If it is not, those provisions will not be enforceable against the employee.

 

Employment Termination Notice Periods – Are They Enforceable?

There was an article a few months ago on HR Daily Advisor about what to do if an employee quits their job without giving any prior notice.  In the absence of a written agreement to the contrary, there is no requirement that either an employer or employee give prior notice of their intention to terminate the employment relationship.  That is the basic meaning of “at will” employment.  Either side can terminate the relationship at any time for any or no reason (as long as the reason is not one prohibited by law).

As the article points out, when an employee quits without notice, it can cause many problems for the employer, some of which may result in extra expense.  When I prepare employment agreements for my clients, I always ask if they want to require the employee to provide prior notice before they can terminate their employment.  Having such notice can allow for a smoother transition by giving the employer time to find a replacement, or reallocate duties among the remaining employees if no replacement will be made, before the employee leaves.  For those employees who are in sales and have significant customer contact, it can give the employer time to contact the customers who will be effected and introduce them to another contact person at the employer.  This will give the employer a better chance of maintaining the customer relationship after the employee leaves.

So what are an employer’s options if an employee quits working without providing the contractually required prior notice?  While that would be a breach of contract by the employee, the employer’s options are limited.  The 13th Amendment to the U.S. Constitution and Georgia law prohibits forcing the employee to continue working during the required notice period.  However, the employer would have a cause of action against the employee for any expenses it incurred as a direct result of not being given the required prior notice and may be able to use the employee’s breach of contract to avoid paying any compensation that would otherwise be due the employee after the termination of their employment (e.g., bonus or severance pay).  This does not extend to withholding payment of compensation for work that has already been done.  The proverbial “last paycheck” should not, as a general rule, be withheld from the employee, as the employer would risk violating the Fair Labor Standards Act and related Georgia laws.

An employee who fails to give the required notice can still be considered an employee of the employer during the required notice period.  As such, they will have a duty not to do anything that would be harmful to the interests of the employer.  This duty can be used by the employer as a basis to prevent sales employees or others who have significant customer contact from contacting its customers during the notice period or to sue such employees who do act contrary to the employer’s interests during that period.  It is generally easier to prove a violation of this duty than of a non-solicitation or non-disclosure covenant.  However, to make use of this duty, the employer must be willing to pay the employee their normal compensation for the notice period.

While an employer’s options for dealing with an employee who does not give the required prior notice of termination are limited, the existence of such a requirement can be helpful to the employer in the vast majority of cases where employees abide by the requirement.

Must An Agency Pay Its Employees If Its Offices are Closed?-Corrected

I have discovered that my post earlier this week on the above topic contained some incorrect information about the payment of exempt employees when an agency’s offices are closed.  Please see the corrected post below.  I regret the misinformation and hope that it did not cause anyone any problems.

Although most of the metro Atlanta area escaped the snow predicted for last weekend and thankfully, the icy conditions we did experience were not as bad as they could have been, I thought it a good time to make my annual post on the above question.  Some areas of North Georgia did get some significant snow and the school systems of many counties are still closed due to icy road conditions.  That creates some difficult child care decisions for employees of agencies in those areas; stay home with the kids or find someone to watch them so mom or dad can go to work.

As noted in my past posts on this topic, the answer to the above question depends for the most part on whether an employee is classified as an exempt or nonexempt employee for purposes of the Fair Labor Standards Act.  An exempt employee is one who does not have to be paid extra if they work more than 40 hours in any one work week.   A nonexempt employee is one that must be paid at a higher rate for any time worked in excess of 40 hours in any one work week.  I have addressed how to decide whether a particular employee is a nonexempt or exempt employee in posts last year about the proposed new overtime rule that has now been stayed.  Even though the new rule was stayed, it is still essential for classification as an exempt employee that the employee be paid on a salary basis in an amount that equals at least $455.00 per week.  Payment on a salary basis means the amount of an employee’s pay cannot be reduced based on the quality or quantity of the work performed by the employee during any one work week. The other requirements that must be met to be an exempt employee are explained in my earlier posts.  Nonexempt employees must be paid at least the minimum wage, but only for the time they actually perform services on behalf of the employer.

Thus, if an agency’s offices are closed for any reason and a nonexempt employee does not perform any services for the agency from home, such an employee need not be paid for the time period the offices are closed.  The same rule applies if the agency’s offices are open and a nonexempt employee does not come in or do any work from home.  This is true regardless of whether the nonexempt employee is being paid a salary or on an hourly basis by the agency. As noted above, if a nonexempt employee performs any work from home on a day when the agency’s offices are closed, they must be paid for the time they actually worked.

Whether an exempt employee’s salary may be reduced depends on whether the agency’s office were open or if closed, how long they remain closed.  An exempt employee’s salary may only be reduced if the agency’s offices are open, but the exempt employee does not come in due to any reason other than sickness or do any work from home.  Therefore, if an exempt employee decides to stay home to take care of children who are not in school or due to severe weather decides they just can’t get to work, their next paycheck may be reduced by an amount equal to the number of full days they did not perform any services for the agency, if the agency’s office was open for business during that time period.  If the agency’s offices were not open for business for less than a full workweek and an exempt employee performs any work during that workweek whether in the office or from home, they are entitled to be paid their full salary for that week.  But the agency can require such an employee to use any accrued vacation or other leave time for the time when its offices were closed.  The key is that an exempt employee must be paid their full salary for any week during which they performed any work, no matter how little.

Do You Know What a QSEHRA Is?

If you don’t know the answer to the above question, you should for it can be a benefit to both your agency and your small commercial lines customers.  QSEHRA stands for “Qualified Small Employer Health Reimbursement Arrangements”, which were created by the 21st Century Cures Act that was signed by President Obama just over three weeks ago.  Many of you may be familiar with Health Reimbursement Accounts (“HRA”), which permitted employers to give money tax-free to their employees for use in paying health care related expenses, including, but not limited to, premiums for health insurance.  Unlike Section 125 flexible spending accounts, any money left over in a HRA at the end of the year could be rolled over for use in later years.

Before the Affordable Care Act (“ACA”) was passed, HRAs were popular with employers who could not afford to provide group health insurance coverage to their employees, but wanted to offer some help with the payment of medical expenses.  With the passage of the ACA, contributions to a HRA could no longer be used to pay for health insurance premiums and the rules regarding for what such contributions could be used became so complex that HRAs fell out of favor.

Under the new law, HRAs that allow for the use of funds contributed to them to pay for health insurance premiums and other health care related expenses of employees are now permitted for some employers with added restrictions.  The first part of QSEHRA tells you who those employers are, Qualified Small Employers.  These are employers who are not subject to the mandates of the ACA (i.e., those with less than 50 full-time equivalent employees) and who do not offer group health insurance coverage to their employees.  As with HRAs, the employer must fund an account on the same terms and conditions for each eligible employee (anyone who has been employed for at least 90 days).  Also. like HRAs if the funds are used for covered health care related expenses, they are tax free to the employee, but now only if the employee has minimum essential health insurance coverage as defined by the ACA.  If not, any amounts paid out of the QSEHRA are taxable income to the employee.

Each employee must be given an annual notice informing them of the above fact and that if the employee applies for health insurance coverage on a federal or state exchange, they must disclose the amount of the benefit available to them under the QSEHRA, which amount will reduce the amount of any premium tax credit for which the employee may be eligible.  The annual notice must also state the amount of money the employer will make available for the employee’s use.  That amount is capped at $4,950 a year for the employee, but can go up to $10,000 if the employee can use the funds to pay for health care related expenses for family members.  These caps are subject to annual increases if the cost of living index used increases. (Click here for the presentation slides of a webinar that contain more detailed information on QSEHRAs.)

Many of you may be thinking why should I explore setting up a QSEHRA program if the ACA is going to be repealed by the incoming Congress.  That will most likely happen, but no one knows when that repeal will actually be effective and what parts of the ACA will be affected by it.  In the meantime, the existence of such a benefit would be helpful in keeping current employees and attracting qualified new ones.  Whenever ACA repeal actually occurs, an employer who has set up a QSEHRA program should be able to easily convert it to a pre-ACA HRA, as the requirements for the former are more restrictive than for the latter.

 

Payment of Producers Under New Overtime Rule

My last post concerned the exemptions from the overtime payment requirements of the Fair Labor Standards Act (“FLSA”) that will most likely apply to the employees of an insurance agency.  While the job duties of a customer service representative can probably be defined in such a way as to qualify him or her under the administrative exemption, because a producer’s primary job duty is the sale of insurance products that exemption would not be available for a producer.  The only exemption for which a producer who is not a door to door salesperson may qualify is the one for highly compensated employees, but as of December 1, 2016, that will require a producer to earn at least $134,004 a year, of which $47,476 was paid as a salary.

If a producer will not qualify for an exemption from the overtime payment requirements of the FLSA, an agency must decide whether to prohibit the producer from working more than 40 hours in any one work week, so no overtime pay will be required, or pay the producer one and a half times their calculated hourly compensation for each hour worked in excess of 40 in any one work week.  The latter option can get expensive in a hurry, so the question becomes is there a way a producer can be paid for working more than 40 hours in a week that is not as expensive as the traditional way.

The answer to that question is Yes by using what is known as the fluctuating workweek method of payment.  To be able to use that method of payment for any employee, the following requirements must be satisfied:

1. The employer and employee have an understanding that the employee will receive a fixed salary for the hours the employee works in a workweek, regardless of how few or many hours are worked, and payment of that salary is made.
2.  The hours the employee works fluctuate from week to week.
3.  The salary paid is such that in any given week, the employee never receives less than minimum wage pay when the salary is divided by the total hours they work during that week.
4.  The employee receives pay at a rate not less than half the regular pay rate for that week for any hours they work in excess of 40 hours in a workweek.

The financial benefit from using the fluctuating workweek method of payment is that the amount of overtime pay is calculated by dividing the total number of hours worked in any one week by the agreed on fixed salary and then using that hourly rate to calculate the amount of overtime pay due for any hours worked in excess of 40 during that week.  For example, if the fixed salary is $800 per week and an employee works 50 hours during that week, their hourly rate of pay is $16, not $20 which it would be if the employee were being paid a salary of $800 a week for an expected 40 hours of work  The overtime pay rate under the fluctuating workweek method would be $24 ($16 + $8), instead of $30 ($20 + $10), resulting in a savings of $60 ($30 – $24 x 10 hours).  This savings will increase with every extra hour worked because the hourly rate of pay on which the overtime pay rate is calculated will decrease.

The main problem with using the fluctuating workweek method of payment for producers is the requirement that a fixed salary must be agreed on, which will be paid no matter how many hours are worked in any given week, 50 or 30.  The fixed salary requirement will prevent a commission only compensation arrangement, but it could be used for new producers if the agency’s practice is to pay its new producers a guaranteed minimum amount and account for any commissions earned above that with a year-end bonus.  For veteran producers, an agency could agree to pay a fixed salary based on the commissions earned the prior year with a similar year-end bonus for any commissions earned above the salary amount.  In both situations, the salary should be adjusted to account for the expected number of overtime hours, so that the salary and overtime pay are equal to what the salary would have been without taking overtime pay into consideration.

Use of the fluctuating workweek method of payment will not work for all agencies or all producers, but it is an option that should be considered when an agency is determining how it will pay its producers and other employees to comply with the new overtime rule’s requirements.

New Overtime Rule – Who Is Exempt?

Judging by the reaction of the audience at a presentation on the new overtime rule I made a couple of weeks ago, that rule is going to create significant problems for independent insurance agencies.  I barely had time to introduce myself before the first question came and they just kept coming.  The focus of many of the questions was whether customer service representatives and producers could be exempt from the overtime pay requirements of the Fair Labor Standards Act (“FLSA”).

I addressed this issue in a post in early 2015.  At that time, the required minimum salary for an employee to be considered exempt was only $455 per week, or $23,660 per year.  I say only because as those of you who have followed my blog posts on the new overtime rule know, the required minimum salary will more than double to $913 a week, or $47,476 a year, on December 1, 2016.  That will significantly increase the financial cost of treating an employee as exempt, which cost should only be incurred if a particular employee can satisfy the duties tests for exempt employees.  If not, the employer is wasting their money and will need to look at other options.  (Click here for a more recent post on what those options are.)  

In my 2015 post, I discussed the most likely exemptions that could apply to customer service representatives and producers.  What was said in that post still applies, with one exception.  The commissioned sales person exemption will not apply to producers or any other employee of an independent insurance agency because that exemption only applies to employees of a “retail sales” business, and the U.S. Department of Labor (“USDOL”) has issued regulations that state businesses that sell insurance are not engaged in “retail sales” for purposes of that exemption.

As I told my audience, that leaves the administrative exemption as the most likely one for customer service representatives and the highly compensated employee exemption as the only one available for producers, unless they operate as door to door sales persons who have no office and meet with their customers only at the customers’ home or place of business. That is not how most producers perform their duties.  Producers will not qualify for the administrative exemption because the USDOL has ruled that an employee whose primary duty is the selling of a product or service cannot qualify for that exemption.  It will be very difficult to argue that a producer’s primary duty is not the sale of insurance products, especially if their main source of compensation is commissions from the sale of such products.  

Exceptions to the above general statements are possible because whether a particular employee is exempt from the overtime pay requirements of the FLSA is a case by case determination that is dependent on the duties actually performed by that employee. However, I told my audience that unless their producers were earning at least $134,004 a year, of which $47,476 was paid as a salary (highly compensated employee exemption), as of December 1, 2016, they would probably be required to pay their producers overtime for any hours worked in excess of 40 in any one work week.  That is true today for any producer who is not making the current threshold amount of $100,000 a year, of which at least $23,660 is paid as a salary.

As with any law, the fact I have never heard of a producer suing an agency for overtime pay does not mean that producers who don’t qualify for the highly compensated employee or outside sales exemptions cannot do so.  It just means no one has tried to do so for any number of reasons.  As explained in my 2015 post, the consequences of not paying required overtime to an employee can be severe and employees have an incentive to file such lawsuits.

For more detailed information on this subject, see the updated question and answer white paper prepared by IIABA and attend its seminar on this subject that is scheduled to begin at 2 p.m. on August 30, 2016.     

The New Overtime Rule – What You Can Do to Comply

My last post was about the requirements of the new rule for the payment of exempt employees.  This post will focus on the options available to an employer to comply with those requirements and the information needed to decide which option works best for each affected employee.  Almost every payroll service company has materials on this topic.  One of the best I have seen can be found here and it includes an online calculator to aid the employer in determining the financial impact of the available options.  For those who want a more focused presentation on the effect of the new rule on insurance agencies, the IIABA will have a free webinar on that subject on June 22, 2016 beginning at 3 p.m. EDT.

The new overtime rule will affect only those employees who are being treated as exempt from the overtime pay requirements of the Fair Labor Standards Act (“FLSA”).  If an employee is being paid a salary and is not paid anything extra if they work more than 40 hours in any one week, including time spent responding to e-mails or telephone calls or meeting with customers outside of normal working hours, they are effectively being treated as exempt employees.  If you have any such employees, beginning December 1, 2016, they must be paid a minimum salary of $913 a week, or $47,476 a year, and meet the other requirements of a recognized exemption to the overtime pay rules. (Click here for a good explanation of those other requirements.)

If an employee does not meet the requirements for an exemption from the overtime pay rules, they can still be paid on a salary basis, but they must be paid one and a half times their salaried hourly rate for any hour worked in excess of 40 in any one work week.  For such employees, an adjustment in their salary may be necessary to avoid an unsustainable increase in their total compensation once overtime pay is included. Similarly, if an employee does meet the requirements for an exemption from the overtime pay rules, but the employer cannot afford to increase their salary to meet the new minimum required, that employee will have to be paid at the overtime rate for any hours worked in excess of 40 in any one work week.  For such employees, the employer will have to decide if it can afford the increase in total compensation that will result.  If not, the employer can either change the employee to an hourly rate of pay or adjust the amount of salary paid, so that in either instance the employee will end up being paid the same amount of compensation as before after taking into account their expected overtime pay.

In both situations described above, the employer also has the option of forbidding the employee from working more than 40 hours in any one week.  In addition to being difficult to enforce, given the current emphasis on value added customer service, which usually includes responding to e-mails and telephone calls or meeting with customers outside of normal working hours, this option may not be a practical one for many agency owners.  In any event, those owners and other employers will have to begin tracking the hours worked of both types of employees, if they have not already been doing so.  Without such tracking, an employer is at the mercy of any employee who claims they worked more than 40 hours in any one week and demands to be paid overtime pay for those hours.  The burden is on the employer to prove such a claim to be untrue and without a good system for tracking the hours worked by its employees, an employer will be unable to meet that burden.

The bad news is that employers who have employees they have treated as exempt and not paid a salary of at least $47,476 a year have a lot of work to do to decide how best to respond to the new overtime rule’s requirements with respect to those employees. The good news is they until December 1, 2016 to do so.

The New Overtime Rule – What You Need to Know

Last July, I wrote a post about a new rule for the payment of overtime that had recently been proposed by the U.S. Department of Labor (“USDOL”).  That proposed rule was made final by the USDOL on May 23, 2016, with its formal publication in the Federal Register.  The final rule differs in several ways from the proposed rule that was described in my earlier post.  Those differences concern the amount of the minimum salary that must be paid before an employee can be considered exempt from the overtime pay rules, how often that minimum salary amount will be changed, the standard for determining the new minimum salary amount, the use of non-discretionary bonuses to satisfy part of the minimum salary amount, and the effective date of the new minimum salary amount requirement. (Click here for an IIABA summary of the new rule and how it applies to insurance agencies.)

In order:

1.  To be considered exempt from the overtime pay rules, an employee must be paid a salary of at least $913 a week, or $47,476 a year.  Those numbers under the proposed rule were $921 a week and $47,892 a year.  Not much of a difference, but every dollar counts.  It is important to remember that paying the required minimum salary does not mean an employee is exempt from the overtime rules. To be exempt from those rules, an employee must be paid the required minimum salary and satisfy the other requirements of a recognized exemption from those rules.  The three exemptions that would most likely apply to employees of an insurance agency are the administrative, executive, and outside sale exemptions.  I discussed two of these exemptions as they might apply to insurance agency employees in a earlier post.  It turns out that my suggestion in that post that the retail sales exemption may be used for producers who are paid mostly on commission is not going to work, as the USDOL has stated in the regulations adopted for that exemption that insurance is not considered to be a retail business for purposes of that exemption.  I find that conclusion to be puzzling given the explanation for what is such a business in the regulations.

2.  The required minimum salary will be adjusted every three years, instead of every year, with the first such adjustment to occur on January 1, 2020 and then on January 1 every three years thereafter.

3.  The required minimum salary will be set using the 40th percentile of full-time salaried workers in the lowest wage Census region, which at this time is the South/Southeastern U.S.  The proposed standard was the 40th percentile of full-time salaried workers in the U.S.  Under the adopted standard, the required minimum salary is projected to rise to over $51,000 on January 1, 2020.  The USDOL will announce the new minimum salary amount 150 days before that date.

4.  The payment of non-discretionary bonuses, incentive payments, and commissions can be used to satisfy up to 10% of the required minimum salary amount, if those payments are made at least quarterly.  This is a totally new rule.  The USDOL considers individual or group production bonuses and bonuses for quality and accuracy of work to be non-discretionary.  The final rule also permits a catch up payment to be made in the pay period immediately following the end of a calendar quarter, if the salary paid to the employee during that quarter was less than 100%, but at least 90% of the required minimum amount. This will give some flexibility to employers who choose to use bonuses, incentive payments, or commissions to pay their exempt employees.

5.  The new rule takes effect on December 1, 2016, instead of 60 days after its publication, so employers have more time to decide how they will respond to the new requirements.

What options are available to employers to satisfy the new requirements will be the subject of my next post.