Do Your Job Classification & Pay Practices Comply with the New FLSA Requirements?

Mercer’s FLSA Assessment Toolkit Helps Employers Understand the Rules & Minimize Compliance Risks

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Overview

Many employers struggle to comply with the FLSA 'white-collar' exemptions. When they fail, back pay liability and penalties can quickly add up to millions of dollars.

The regulations from the US Department of Labor (DOL), which have been in effect since August 23, 2004, include salary and duty requirements that determine whether executive, administrative, professional, outside sales, and computer employees are entitled to, or exempt from, overtime pay .

Potential Liability: An Example

Assume

·         30 employees (EEs) improperly classified as exempt

·         Average unpaid overtime of $4,000/EE per year

·         Willful FLSA violation (i.e., employer should have known EEs were nonexempt)

At Risk

$720,000 back pay: $4,000 x 30 EEs x 3 yrs = $360,000 x 2 (liquidated damages for willful violation)

$2,376,000 civil penalties: $1,100 per paycheck issued w/o overtime due x 72 pay periods x 30 EEs $200,000 + attorneys’ fees, administrative costs, defense costs

$330,000 criminal penalties: $11,000 per violation (i.e., misclassified employee)

TOTAL: $3,626,000

Classification analysis is not simple. Employers may need to change job classifications and/or redesign jobs, change pay/reward programs, and rethink some service delivery models.

All employers need to assess their current classifications under the FLSA regulations and determine whether they need to make conforming changes.

FLSA Assessment Toolkit

Mercer’s FLSA Assessment Toolkit: Tools to Determine Exempt/Nonexempt Status can help you focus your time and efforts on what you need to do to achieve compliance -- you can dedicate the estimated 100 hours (at a minimum) that the tools will save you to the more important tasks of analyzing at-risk jobs and implementing necessary changes in a manner that best meets your business needs. Developed by Mercer’s FLSA experts -- employment practices risk management attorneys with extensive experience helping employers minimize FLSA-related compliance risk -- the kit consists of eight items to help you conduct the assessment and minimize your organization's related risk:

• Job Content Questionnaire (JCQ): This form is used to gather the detailed job content information needed to determine an employee’s exempt/nonexempt status. The JCQ also captures information that will allow employers to develop or update effective job descriptions, verify job content for market pricing purposes, and comply with the Americans with Disabilities Act. Information can be filled out online and printed out.

• Instructions for Job Content Questionnaire (JCQ): The instructions are designed to ensure that everyone completing the JCQs provides sufficient detailed information and examples to permit accurate assessment of job content.

• General Guidelines for Assessing Job Content Questionnaires: This document provides a methodology for reviewing JCQs to determine which FLSA exemptions might apply.

• Detailed Guidelines: How to Determine Whether an Employee Qualifies for Exempt Status Under the FLSA Final Regulations: Condensing hundreds of pages of DOL guidance into a relatively simple roadmap, the detailed guidelines include a preliminary analysis that will help you focus on jobs that need additional consideration; a detailed process for evaluating duties and responsibilities; and instructions for applying the regulations’ salary and fee basis tests.

For your convenience and to assist you in customizing portions of the Toolkit, in addition to the Acrobat package, we also make available the Job Content Questionnaire in MS Word and the presentations in MS Powerpoint.

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