DOL Overtime Requirements and Strategies for Community Banks

1. 3 FORUMSThree Financial Workplace Compliance Programs for HR DOL Overtime Requirements and Strategies for Community Banks Presenter: Ray Stanford The Forum tackles legal challenges faced by workplace professionals. For this reason, the Forum’s comments and discussion are not intended to be legal advice or counsel. As with all legal matters, participants should look to licensed counsel to deal with a specific matter.

2. 10:00 Welcome & Introduction 10:05 Overtime background 10:10 Proposed Rule: $35,308 salary threshold 10:15 Proposed Rule: Regular rate clarified 10:20 Strategy: Transition compensation 10:20 Strategy: Salary for non-exempt workers 10:25Strategy: Government Affairs 10:30 Adjourn DOL Overtime Requirements and Strategies for Community Banks

3. 2019 1st of 3 Forums: “Trump’s primary impact on FLSA will be on a final regulation increasing salary threshold for the overtime white collar exemptions.” • This Spring, the DOL proposed two rule changes: • Increase the salary threshold for the white-collar exemptions to overtime payments; and • Clarify perks to be excluded from calculating regular rate. • For HR: • What should I know? • What should I do? • Will a mistake really make a difference? Introduction

4. 3 Forum Objectives • Explain proposed overtime salary threshold requirements of • $679 per week or • $35,308 per year • for exempt executive, administrative, and professional employees • Explain proposed changes to regular rate Introduction

5. 3 Forum Objectives (cont.) • Explore strategies • Transition compensation until January 2020 • White collar exemptions for financial organizations (e.g. MLO, …) • Salary for non-exempt workers • Impact of pay analysis under Component 2 of the EEO-1 • Governmental Affairs Introduction

6. This Spring, the DOL proposed a rule to increase the salary threshold to $679 per week or $35,308 per year for white exemptions to overtime payments effective January 2020. • The DOL proposed changes to the types of perks that may be excluded from the regular rate (e.g. certain premium pay, benefits, etc.) Introduction

7. White Collar Exemption • The executive, administrative, professional and computer exemption from the FLSA overtime requirements must satisfy three tests: • The salary-basis test: (a requirement since 1940); • The duties test: (a requirement since 1938); and • The salary-level test: (a requirement since 1949). Overtime Background

8. Legal Path • Since 2004, minimum salary-level has been $455/week or $23,660 annually. • In 2016, President Obama’s DOL proposed an increase of the salary threshold to $913/week or $47,476 annually. • Salary-level would have been equal to the 40th percentile of average wages for full-time salaried employees in the lowest-wage Census region (South). Overtime Background

9. Legal Path • November 22, 2016 - Judge Amos Mazzant (Obama appointee to E.D Tex.) issued a nation-wide, preliminary injunction barring DOL’s proposed overtime regulations. • March 7, 2019 - DOL announced the proposed salary threshold for white collar exemptions to overtime. • March 28, 2019 - DOL announced a proposed rule to clarify perks that should be excluded from regular rate. Overtime Background

10. DOL Proposed Rule • Rescinds Obama’s 2016 final rule. • Increases salary level threshold to $679 per week or $35,308 per year for exempt executive, administrative, professional and computer employees. • Increases total compensation threshold of highly compensated employees (HCE) to $147,414 per year • Note: “at least $679 must be paid weekly on a salary or fee basis.” Proposed $35,308 salary threshold

11. DOL Proposed Rule • 10 % of the salary level threshold may consist of non-discretionary bonus and incentive payments, including commissions. • Non-discretionary payments must be made on an annual or more frequent basis. • Salary level threshold for of $455 per week for the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico or the U.S. Virgin Islands and $380 per week for American Samoa. Proposed $35,308 salary threshold

12. DOL Proposed Rule • Would not alter standard duties tests for the executive, administrative, professional, outside sales, or computer employee exemptions; • Would not automatically increase salary threshold or highly compensated employee threshold on a periodic basis; • Would not allow non-discretionary bonus or incentive payments to count towards meeting the total annual compensation amount for highly compensated employees. Proposed $35,308 salary threshold

13. Definition • FLSA normally requires payment of one and one-half times the regular rate of pay for all hours worked in excess of 40 hours per workweek. • The regular rate is the compensation an employee normally earns for the work they perform. The regular rate of pay includes different types of remuneration such as hourly earnings, salary, piecework earnings, and commissions. • The regular rate determines how much nonexempt employees covered by the FLSA receive in overtime pay. Regular Rate

14. Definition Proposed rule excludes specific remuneration from regular rate. Include: • Premium pay beyond daily or weekly standard • Premium for work on Saturdays, Sundays and other special days • Premium for weekend and holiday work • Discretionary bonuses • Certain benefit-plan contributions • Tuition reimbursement or repayment • Payment for unused paid leave • Reimbursement for expenses; e.g. travel • Pay for idle hours • Call-back pay • Note: Exclusions may not affect overtime by more than 40%. Regular Rate

15. Factors • Current compensation: • Salary already increased to $913/week or $47,476 annually • Salaried changed to overtime • Employee job description changed to satisfy other white collar exemptions (e.g. executive, outside sales) Transition compensation strategies

16. Factors (cont.) • Position already paid under administrative exemption • Component 2 in EEO-1 Report due September 30 • New Salary Threshold effective January 2020? • President/ Congress November 2020 election • Wednesday, January 20, 2021 – President Inauguration Transition compensation strategies

17. DOL approved salary for non-exempt workers • Belo Contract • Fixed Pay for Fluctuating Hour Workweek • Other Strategy: Salary for Non-Exempt Workers

18. Trump returns to opinion letters • Opinion Letters – DOL process of answering specific question. Request may be anonymous. • Bush - DOL Opinion Letter found Mortgage Loan Originator fell within Administrative exemption • Obama – DOL withdrew MLO opinion letter • Trump - DOL has not addressed matter • Association or group of banks might submit an opinion letter Government Affairs

19. May 16 – New EEO-1 Report & Pay Analysis • EEO-1 Reports must include a compensation analysis on the basis of race and gender; • Statistical models must be developed for the compensation analysis; • Sex-based pay discrimination remains a leading cause of litigation; • Lilly-Ledbetter statutes of limitation increase the risks substantially; • Even newer - Court clarifies due date for pay analysis based on gender and race for years 2017 and 2018. May 23 – New Joint employer law/ Performance Management v. harassment/ … • NLRB and other agencies rejected the Obama definition of joint employer and reinstated the Bush interpretation; • Most third-party contracts rely on the Obama definition; • Difference between performance management and offensive conduct and harassment; • Bank regulations mandate third-party risk management. Future Forums

20. QUESTIONS? ? DOL Overtime Requirements and Strategies for Community Banks

21. Ray Stanford Founding Attorney SIO Law Group Atlanta, GA rstanford@siolaw.com (404) 991 - 7301 Presenter

22. THANK YOU FOR PARTICIPATING!