Strategy for Meeting the New White-Collar Overtime Exemption Requirements

The Department of Labor is raising the salary level required for white-collar workers to be exempt from overtime pay. The new rule increased the minimum salary from $35,568 to $43,888 on July 1st, 2024, and then to $58,656 on January 1st, 2025, with automatic adjustments starting in 2027. This may cause issues for employers as they decide how to respond to the changes. Options include raising salaries, reclassifying employees as hourly, or changing overtime pay methods.

The webinar discusses strategies for employers to deal with the new requirements.

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Webinar Transcript

Elizabeth K. Dorminey (00:00):
Good afternoon, everybody. I think I'm the first to wish you good afternoon on today because it's just a couple minutes afternoon. My name is Betsy Dorminey. I'm an attorney at Wimberley and Lawson, and today we're going to give you a webinar about the new rules that just took effect July one for executive administrative and professional exemptions to the overtime requirements of the Fair Labor Standards Act. Now, my esteemed colleague, Larry Stine, is going to be telling you about this, and honestly, I don't think you could find in the United States anybody with a better perspective on the wage and hour loss. Right here behind me in the blurry background is a four volume set, maybe five volumes by now of a treatise on wage and hour law that Larry and our colleague Les Schneider put together and has been updated annually to reflect all of the continuing changes in legislation and litigation that have had an impact on, on these laws.

Elizabeth K. Dorminey (01:05):
Larry spent 14 years at the US Department of Labor as a solicitor, so he is familiar with the government side of the fence, but after that career, he has been in private practice for a good 30 years now. So honestly, you couldn't get anybody with a, with a, with a, a more comprehensive understanding of these these requirements. So without further ado, let me just set the context here. The executive administrative and professional exemptions were part of the original Fair Labor Standards Act and were designed to exclude from the overtime requirement employees whose duties comprise these kinds of activities, an executive, somebody who is exercising discretion on behalf of the company, making big decisions and so on and so forth, or professional. And the reason being there, the rationale was that these people are exercising more of a professional responsible requirement duties in their jobs, and they did not need the protections that were afforded by the overtime requirements, which it's important to remember, although it's often lost in the translation, were designed originally to encourage the hiring of more people to do work rather than just putting more pockets in the money in the pockets of the people who were working.

Elizabeth K. Dorminey (02:39):
So with that introduction, let me pass the microphone to Larry and you will get us started.

J. Larry Stine (02:48):
All right, thank you, Betsy. Appreciate that. So we're, we're looking at the salary changes to the regulations right now, and I've got the chart of this chart comes from Wage and Hour, just so you know where it came from. So we start with the before July 1st, 2024, and the standard S salary was $684. HCE stands for highly compensated employees, which is a test of a salary plus just one due. So it's pretty easily to qualify for that. Once you hit that high qual high compensation on July one, a few days ago, it changed to 8 44 per week, which is a $43,888 annual income. And though the high compensation employees salary went to $132,964 per year. Now as you can see, that's a 24% reduction. The last time the salary was changed was in 2019. So you can see there's a 24% increase, probably more significant is the January 1st, 2025, because they proposed to raise the salary 65% to $1,128 per week, or $58,656 a year, and the high salary to $151,164 per year.

J. Larry Stine (04:22):
The high high compensation was basically vote your wallet a type of requirement. So that, that's where we are. Now, the problem is, you know, some of us could probably handle it but then January one is a really tough one. So here's some of the things I, I ran the salary as I said, it was passed and changed in 2019. I used an inflation calculator and came out to $840. So we're not very far off of 8 44. It was just a roughly an inflation increase. So a lot of us are on that seem to be having much problem, I think because of that inflation increase. The second degree, like I pointed, was signify off, and here's the last thing they did. They put an updating mechanism. Now, the problem, there's some real problems with this, not an inflation. It, it uses the 35 percentile of the census data for salaried employees.

J. Larry Stine (05:24):
And the highly compensated employee salary is used in the 85 percentile. Supposedly these were the, that's what they used, the January increases. The problem is, I think there will be a creek, because when they now stick their nose into it and push you up to 35, they're going to push those salaries up and up, and they're gonna get rid of basically the bottom 35 percentile. It's gonna be, and now they'll be down at the bottom. Now, there was an injunction against it, however, the injunction was only as to the state of Texas, not the, everybody in the state of Texas, just simply the state of Texas as an employer. And wage hour in response to that says, okay, we won't do it there, but it implies to all other employers nationwide. So there will be challenges. Our crystal ball as to what will happen is rather murky.

J. Larry Stine (06:28):
I can't tell you what it will do or how it'll do it, but part of the problem is it applies right now. And the question is, what can I do now? And the regulations get struck down later on, then we can add another one. Hey, we don't have to do this, but as of right now, wager is gonna come after. So there's a couple of things we can do to respond to it. We can raise the salary to the new requirements, we can change the employees to hourly. We can change the employees to a non-exempt salaried employees to status, which baffles some people, but we'll talk about it or we can look for other exemptions. So what most of the seminar is going to be about from this point on is we're going to look about the pros and the cons and some of the legal issues involved in taking these steps.

J. Larry Stine (07:37):
Now, the, obviously the one with the, the path of the least resistance is to increase the salary to the new amounts. And like I said, the one in July is probably not that hard since an inflation amount still can impact some people. The one in January though, is enormous and I think's gonna really have a lot of people up there. And so by the way, that's a $23,008 annual increase, which is, can be a very difficult issue to budget. That really gets into some people's bottom lines. But let's just take a larger organization, for example, and, you know, they've got 10 of these employees and a facility, they're just now looking at $230,080. So unless you're one of those lucky people that just kind of have a spare $230,000 hanging around that you don't mind your annual increase. This is not necessarily the best way to handle this particular particular issue, but that is one you'll have to look at and make a decision.

J. Larry Stine (08:57):
And basically a lot of times the decision would be, and what I see is we'll move some that are closer to that limit up, and then the ones that are much further down, we'll do something else. It's not a, every employee has to be one path of another. One of all these suggestions I'm having for ways to do it can be applied, like, I'm gonna raise these people salary up to the new amount. I want to handle these people by going to hourly and I want to handle these people by going salary non-exempt. And some of 'em, I'm gonna see that there's another exemption that applies. So these are all things, they're not, they're not exclusive. They can be all used together. And so you need to look at that. So let's look at the, the change to hourly. So it, it basically what happens is you're going to, you know, you're gonna take these salaried employees and change 'em to our, now here's the interesting thing about this is some of the people react by saying, well, I'm, you know, and I'm paying 'em an $800 the week salary, I've got to change it to 2,800 divided by 40.

J. Larry Stine (10:18):
That's not necessarily true. And we'll talk about how we can do it. Now for the vast number of the employees at this level, you're not gonna have written contracts and they're employed at will. So you can change their pay going forward. Just need to let them know you just can't spring it on, you can change it 'cause their employees at will. We're going from salary to hourly. Now. Now my my interesting thing about changing people to hourly is but when I did my very first audit when I went into private practice, I went in and found a bunch of customer services rep who were basically inside sales, not outside sales, and they weren't exempt. And I told the company they weren't exempt and the upper management said, fine, we'll change 'em. And for the next six months I got very irate calls from the employees, not the employer. What I learned is that there, a lot of these employees are resistant to being changed our, they just don't like it. And we'll talk about how to handle that problem in a little bit now. So I said, you don't have to take the $800 salary and just make 'em 20 bucks an hour.

J. Larry Stine (11:51):
So the question is, how do I do that? What do I do? What rate do I use? Well, if you want to basically calculate the overall hourly rate so that the annual pay, which includes the overtime can be the previous salary you can do. Now question is how, well first thing is determine the average work week for the employee. How many hours does he normally work for his salary? Because some of them do work more than 40 hours. So I'm gonna make an assumption here that we have an employee who works 50 hours a week regular, and the salary is $800.

J. Larry Stine (12:48):
So how long has it been since you have used algebra guys? I, I think a couple of you all are probably I going up, but here's an algebra formula. The regular rate equals X times 40 plus 1.5 x times 10 equals $800. Did I just inflict some pain on you by bringing up algebra? Well, the answer to spare you the algebra is $14 and 55 cents an hour. If you use that formula and you run it backwards, you'll see, so here, here it is, 40 times 14, 55 at the straight time pay is $582. The overtime is calculated at 10 hours times 1.5 times 1455 for $218 and 25 cents for total pay of $825. Now you can do that, it is legal and it is a way that you basically don't make any changes for your $800 guy who's normally working 50. Now, part of the problem for being hourly, if he's out and he works $42, he's going get less than $800.

J. Larry Stine (14:08):
Conversely, if he's working more than 50 hours, his pay will be more than $800. That's because of the very nature of the the hourly pay. But it is, it is allowable. You can do it. There's you, unless you've got a written contract that says he has to be paid a certain way, which in our experience we just don't see at this level and there being an employee at will, you can do this, you can drop down the rate. It doesn't have to be now expect some pushback. You're going to have employees come in there and tell you that their salary was $800 and their regular rate of pay has to be $20 an hour. It, that's not true. And it's, there's no law inside the FLSA that says you have to do that. So think about that. If I'm going to change the morally, do I want to go and do salary divided by 40 and just stick with it and have that increase?

J. Larry Stine (15:18):
And that's, by the way, wage an hour tells everybody that because they're taking people from the salary and move 'em the over time they're gonna make more money. The problem is that's not true. You don't have to do it. That's just wage hour being very optimistic that employers don't take the time and effort to educate themselves and figure out how to take people from salary to hourly with a normal work week and make the pay come out the same. And by the way, I, I did this so that you could see the answer, but what happens is you're going to, if they do that, what the employee will see is at the end of the normal pay period, their pay is gonna be basically the same. Now, the another one is basically the non-exempt salaried employees. And we get a lot of pushback on non-exempt salaried employees.

J. Larry Stine (16:24):
I will tell you, when I've done audits at a lot of times what I have done, I've gone in and a lot of, a lot of companies are salaried, exempt or hourly. They have two tier way of looking at the world from what the FLSA view, and they're either exempt or not exempt, which is true. And from that concept they go, it's either salaried or hour. But when, as I pointed out when I did my first audit, my biggest surprise in the audit was the pushback came from the employees. And what we determined was that going from a salary to an hourly rate of pay is a huge social demotion to a lot of people. And to some people that social demotion is as important as the pay. And so you've got to understand that particular issue from the employee's point of view. So let's just talk about it.

J. Larry Stine (17:36):
The FLSA does not mandate that employees pay in a certain method except in certain exemptions, like the white collar exemption, the ones we're talking about, has a salary requirement in the exemption. And I have here what's called Section seven I, which is a retailer services establishment Commission plan that has a mandate that you pay them in order to qualify is a commission which makes particular sense. And as I noted, the, my big surprise was in a, my very first audit was that the pushback came from the infected employees and not the managers. And it's because they see it as a social demotion. Now, there's another issue. Some of y'all have benefit plans for hourly employees and for salaried employees.

J. Larry Stine (18:37):
And that's can be an issue that you, you've got to look at because all of a sudden you're moving 'em, if you're moving 'em from salary to hourly, you're changing their benefits. So it's a bigger cut in benefits and pay than you're anticipating, but the employees will, they will be aware of that particular issue. So let's talk a, we're gonna go into some depth about these non-exempt salary salaried employees. All right, here's, here's four things that we're going to look at. Okay. The non-exempt salaried employees derives from a Supreme Court decision from 1942. Believe it or not, that decision was before I was born, not by much unfortunately, but it was so overnight transportation, overnight motor transportation company versus missile. And as you can see it's a 1942 case. Well, what happened in that is the fair labor standards that was passed in 1938.

J. Larry Stine (19:44):
And one of the questions was, what do we do with salaried employees? And what the Supreme Court said is basically for employee, that employers can pay employees south, but that doesn't mean they're exempt. They can still be non-exempt. And what the Supreme Court did in these early decisions in the forties says lawyers can pay 'em whatever they want. The court's responsibility is to make a determination as to how the employee and the employers have agreed to set the pay. Now that agreement's not much. I'm gonna bail you on the salary and here's the salary and you're gonna work these hours and we are going to then apply this overtime rule to it. And what they did in this case is they said, okay, he's paid a salary now for overtime. The way we're gonna do it, because the salary is paid for all hours work, the straight time pay has already been paid.

J. Larry Stine (20:51):
So what's missing is the additional halftime and the time and a half pay for the hours over 40. So you'll divide the salary by the total number of hours to come up with, they're called the regular rate. And then you'll pay half that rate times the overtime hours. Now, if some of y'all have employees in California or Washington or Oregon be advised that they have passed either laws or regulations that do not allow this decision to apply in those states, they mandate that if you pay a salary, you've gotta use 40 as the divider to get the regular rate. Anybody that pays a non-exempt salary in California, Washington, Oregon needs to have their head examined because what you're basically doing is you're agreeing to have a salary in which they work 32 hours. You still pay 'em a salary, but the minute they work over 41, you're paying 'em time and a half.

J. Larry Stine (21:56):
So it is solely a, a type of payment in those states that is solely for the benefit of the employee into the detriment of the employees. An hourly rate makes, at least in those states, they work 32 hours. You only have to pay 'em for 32 salary means you've got to pay them the same salary for hours worked above and below 40. That's the agreement you need. The agreements is that the salary is for all hours work above and below 40 hours. Now, wage an hour didn't much like the overnight transportation decision. And so they've issued a regular, a, not a regulation, but an interpreted bulletin. Now the interpreted bulletin is not a regulation, which just means that the courts can look at it and give it weight for what it is. And now the weight of it has been changed and a current Supreme Court decision called low or bright how much weight it's gonna be.

J. Larry Stine (23:01):
But this one do understand has been around for a very long time. It hasn't been changed. It's 29 C FFR 7 7 8 1 14. And it does say you have to have an agreement. Some of the courts have taken that to say you have to have a written agreement, you have to have an understanding that really overstates what the Supreme Court says. And when the court of appeals have been pushed, that there's a difference between 7 7 8 1 14 and the overnight decision. Every court of appeal that's been presented with that issue has ruled that the Supreme Court decision trumps interpreted bulletin, which is the way it should be.

J. Larry Stine (23:42):
So let's look at how we do this. If the agreement's in place, now remember we gotta have an agreement and there's a quid pro quo. If somebody works 32 hours, you can't dock 'em for their hourly rate decided by divided by the salary by 40, you've just decided you're gonna have a agreement for a salary for 40 hours only. So it's gotta be above and below. So the overtime is calculated as the salary divided by the total number of weekly hours to determine the regular rate. And the reason we use the term regular rate is if you look at the statute, it says that overtime is a re is time and a half. The regular rate, they don't use hourly, they use the term regular rate. So basically if you're paying a non-exempt employee, any type of compensations, and they're not exempt commissions, bonus peace day salary, the formula remains the same.

J. Larry Stine (24:52):
You take all this money, you would pay them for the straight time that they work for the total number of hours they work, divide it and you get the regular rate. If you look at the interpretive bulletins, they have one for day rate, they have one for commissions, they have a bunch of 'em, and they all have the same fundamental formula. And overtime is calculated as one half the regular rate times the overtime hours. So let's look at the regular rate we're gonna use, this guy's been making $800 a week and he, this time he works 50 hours, he's paid on a non-exempt salary. So the regular rate is $800 divided by 50 hours to come up with a regular rate of $16. Overtime then equals half times $16 times 10 overtime hours equals 80. So the total pay is is $880. That's not on the screen.

J. Larry Stine (26:01):
But let me, let me give you a contrast and I'm gonna do it off the top of my head and I'll make a math error guys, you can <laugh> send a chatter or a mistake and let me know I did it. But let's just assume the guy's making $20 an hour, which is basically, if you think about it, $800, divide it by 40 and it's $20 and he works 50 hours and I'm gonna do it in the, the way it's done here. So he makes $20 an hour and he works 50 hours. Well, 20 times 50 is a thousand. And if you divided 50 into the thousand dollars, guess what your regular rate is, it is 20. Now the overtime equals half times, 20 times 10 overtime hours. So now we are at, okay, I just another it is a hundred dollars. So that particular employee who looks like they're being paid the same, $820 a week, 800 a week actually makes $1,100.

J. Larry Stine (27:18):
And some of my clients have a real hard time problem with that because in their mind, the $1,100 is the correct number. And how can that total overtime pay the $880? I did put this in one with my clients one time and he, he, he, he was very uncertain about it, but he did it. And I got one of the most panic calls I've ever gotten from a client from the Scott 'cause wage hour was coming in to do an audit and he was in an absolute panic about the non-exempt salary status. And he, he called me back a little. He did not have me handled, he'd handled it himself. But you can imagine he had a little bit of chagrin when he called me and I said, well what happened? He says, the wager investigator told me that was perfectly legal and perfectly correct <laugh>.

J. Larry Stine (28:18):
And my response to is, well do you now, do you believe me? And he said, yeah, now I believe you 'cause I went through a wage hour audit. But it is a little hard to see that without contrast. And but to see you make a huge savings, you make a huge saving and you don't get pushback from the employees, which is the weird thing because they remain a salaried employee. Now the one other thing I will tell you that I want to warn you about non-exempt salaried employees is they begin to push back working overtime. This is a really good way to pay employees that you want to normally have around 40 hours, by the way. 'cause It doesn't take them long after they, you know, work some overtime. And, and think about it the way most people think, even the employees only salaries that are thinking, I only work 40 hours, I make $800, so make $20 an hour. And that's mathematically a fair way of thinking about it's not the agreement. Fair way of thinking about it. And then I go work 10 hours, I make eight bucks an hour for working overtime. Why do I want to work overtime? And you will find as times go on, if this is system you want, you will get a little bit of an issue about that particular question. So that's the non-exempt salaried employees. We will have a few minutes at the end of this to see if you have any questions.

Elizabeth K. Dorminey (29:54):
Larry, add one little here. On a practical level, on a very practical level, part of the transition that's going to be a challenge for a lot of people is that with the increase in the number of people entitled to be paid overtime, you have to keep time records. You do and, and be an, that can be an obstacle and an issue. But there are separate violations for record keeping if you do not maintain those records. And you know, you, you, you may have a, a shall we say an education period with employees who are used to just getting an amount per week when you tell them, oh no, you have to sign in. You have to sign out. We need to know, you know, when you're here, what hours you're working and all of the complications that can arise. Should you decide that you want to have a paid or an unpaid lunch period in the middle of that?

J. Larry Stine (30:48):
And that, that's a really good point. Maybe I'll spend before I switch to the, to go to the exemption, should just spend a little time. Betsy makes a very good point. Remember I talked about how employees kind of react to social demotions? Well, they don't like clocking in because that's something for the hour. And I have found that to be an issue. However, you don't have to use clocks. There are a couple of ways that are perfectly permissible under the regulations to get their time. But you do, as Betsy pointed out, have to keep time records. One way is 'cause most of these people will be working on computers is when they log in, the first thing they do when they log in and boot up their computer is they go to a computerized program. And there are multiple choices for what you can use.

J. Larry Stine (31:45):
Some of your times systems allow it there are free time uses for logging in and logging out and they'll send you reports on it. We actually used one's free being cheap. I made the decision to do this. And they go and they log in and they log out, right? Right. Af right when they log in, it's the first thing they do. And when they log out, it's the last thing they do and you get an accurate record. Another way of doing it is if I've got employees that work in, you know, clerical or support jobs and they basically are working a nine to five schedule, you can do this and the people were a little odd, but it's, it's actually suggested by wage hour. You can print a schedule saying, Hey, Monday through Friday you do eight to five and a half hour for lunch or an hour for lunch, and you give 'em a schedule and at the end of the week you have them sign off.

J. Larry Stine (32:50):
That's exactly what they were. Or they will put on it that they took some time off and went to a PTA and went to this. Remember, just because they report 38 hours, the salary remains the same or you're in real trouble, you will lose this very nice process if you talk, but you can keep up with it and you need to, so you can show that in weeks they work 38 32, you're still paying the same amount of pay. And if there's a, and if there's an over deviation, they write it on this sheet and it's, and put it by somebody not necessarily the employee, and you pay in the overtime on it. So you have a set schedule, go ahead, judge. If

Elizabeth K. Dorminey (33:33):
Larry drop a footnote there with the people working through lunch hours can be a giant source of litigation or it was for a few years. I haven't seen so much of that recently, but that's another exception that you have to sort of retrain your people to anticipate and to record. Because if you have this pre-ordained schedule that says 30 minutes for lunch, but you know, if somebody was out, I had to sit by the desk, I had to stay by the phone. You, it's it's, it's very important to continue to monitor that and to correct any exceptions to the schedule that might result from people working through lunch.

J. Larry Stine (34:16):
Right? And that would be one of the exceptions on the schedule is you'd have a schedule as a half or one and at the end of the week, if you use this schedule method, they would put down, Hey, I missed, I didn't get to take my lunch for two the days and now I've got an hour of overtime about, about to, but assuming you were working an eight hour instead of a seven and a half, a lot of people basically schedule, you know, the nine to fivers really get scheduled for seven and a half hours of work, not eight. So if it's, if the lunch is a half hour and that's where you're getting that, it, it becomes a lesser event. It's big for people that you are putting on cards they gotta, or computers. They gotta remember to log in and out for lunch. And it's not an automatic duction.

Elizabeth K. Dorminey (35:08):
There are also a lot of cell phone based apps. I know a contractor who uses one that that also has geolocation. So you know that when people are signing in, they are actually where you're expecting them to be when they're beginning work.

J. Larry Stine (35:23):
Yes. And, and we have used those geolocations in some employment discrimination cases to fire people who punch in and punch out at their house.

Elizabeth K. Dorminey (35:32):
Yeah.

J. Larry Stine (35:33):
Yeah. We, we've had examples where we've had charges where employees have logged in and logged out and never let the house and forgot there's the geolocation provision in it. And by the way, those never get beyond Ango c charge. So we got a couple other issues here I wanna go to and, and that, that's the last category is the exemptions because we have the exemptions available for some of these people that you've been using. The white collar exemption actually are sometimes are exempted under more than one exemption. So I'm gonna throw out, we could spend another whole webinar just actually, we could probably spend more than a couple of webinars on just the exemptions allowed under the Fair Standards Act. But I wanted to pick a few and talk about them. And I've tried to pick some that are related to salaried employees.

J. Larry Stine (36:36):
I've had discussions as you can imagine with clients about transitioning to this particular problem already since July one. And some of these are some of the exemptions that we have explored. There is an outside sales white collar exemption. And the interesting thing about outside sales, which means makes it still available even though it's a white collar exemption, unlike the ones for administrative professional and the executives, believe it or not, this does not have a salary requirement. So if you have employees who are working legitimately in outside sales, and we'll talk about what that is in just a moment you don't have to pay 'em a salary. Now you may give 'em a draw, you may may figure out that that's just too hard. You give 'em a salary plus a commission, but the salary is not required to get the regulation. Basically what the, the exemption requires is that your employees are doing what it says, they're leaving your location and they are going to visit clients for the purpose of making sales of your product.

J. Larry Stine (37:54):
And the, their requirements is that their primary duties and time is engaged in outside sales. Now, just so you understand this, that does not mean that they have to spend 50% of their time out of the office. That's not the way the regulation sets up. The regulation says if say if I go visit a client, or let's just say I just go once a week, I go visit one client a week, I'm coming back to the office and I'm doing things like resuming bids to that client, sending material to their client. Now talking to them on the phone Department of labor's position is that is all outside sales activity. So the activity that you generate by making those calls and the work that you generate in anticipation of making those calls are considered outside sales. And if you're spending most of your time doing outside sales will be primarily outside cells and you don't need to do it.

J. Larry Stine (38:57):
Now, I will make this point because it's important. I, there's a huge distinction between outside cells and inside cells. And the problem that we run into sometimes is that inside sales employees are not exempt under the white collar exemption unless they happen to be something different. You know, if I'm a salesperson and I'm managing some people, I can get the executive exemption, but they do not qualify for the, the, the people who do the inside sales work do not qualify for the administrative exemption, which is where you would think they would fit. And the reason they don't is under the administrative exemption, they have what they call the administrative production dichotomy. And under that dichotomy, the courts have said sales is protection, not administration and therefore you do not get the exemption. One of the most common violations of fine when we do wage hour audits is to go into the sales department and find the customer service reps, the inside sales, whatever you want to call 'em, salaried exempt.

J. Larry Stine (40:07):
And they cannot, they're just not gonna qualify for it. You can make them non-exempt salaried or non-exempt salary with the commission. But one of the things you can do, I mean you're looking at some of these people, if they're doing the outside sales and they qualify, you can continue to pay 'em whatever you're paying. You don't have to raise the salary up to the salary limit because the particular exemption doesn't even require a salary at all. Another exemption is 13 B one. The reason I brought this in is one of my clients recently called me and they had supervisors and their transportation department overseeing truck drivers who are driving big trucks in interstate commerce. And, but the supervisors, because of the nature of their work and because of the, you know, employees don't show up and they got a truck, the supervisors get in the trucks and they drive and occasionally they cross state lines also and they can be exempt from overtime under which section 13 be one. So if you got people who are supervisors in your transportation area, and they, because of the nature of you don't always have your drivers are driving in tra in interstate commerce with trucks seat 10,000 pounds, you've got the exemption.

J. Larry Stine (41:31):
Another example we had is I had an agricultural exemption in a poultry plant in which the managers worked in the hatcher and they had been using the other, the 5 41 white collar exemptions to keep from paying 'em. However, hatcheries are covered by the agricultural exemption. So if you have managers who are managing a farm, for example, or a test farm or a pilot farm, and all of a sudden their salaries not go up to the proper level, they still may be exempt under the agricultural exemption. They're, they're more well there's like 52 <laugh> in the Fair Labor Standards Act that they may or may not qualify. You know, on those you have to start looking at 'em on an individual basis. Now we've been talking for about, oh, about 45 minutes now. Hopefully it's been helpful to you, but I wanna see if there's any way we can take questions now if anybody's got any questions and here we are. Please let me know.

Elizabeth K. Dorminey (42:50):
Well Larry, I'd have one closing remark if we don't have a question right away. We

J. Larry Stine (42:54):
Do not.

Elizabeth K. Dorminey (42:55):
Okay. Well I'm going to get out my crystal ball here a little bit and I'm going to conjecture that this regulation might not last forever. And my reason for thinking it is this, the Texas case that Larry mentioned at the beginning is by no means the only challenge to these regulations this a maneuver very similar to this was attempted in the Obama administration and it went down with the subsequent Republican administration coming in. If we have a change of administration next January very frequently one of the first things that the new administration does is to take a look at some of the things that the old administration did that they don't particularly like and they get the acts. So the Texas decision came out on the heels of Loper Bright. I do think that that decision which invalidated what had been for long times called the Chevron doctrine of deference to agency interpretations of ambiguous statutes is going to generate a lot of challenges.

Elizabeth K. Dorminey (44:06):
The Texas one, the rationale in that case is by no means limited to state government employees in the state of Texas because the basic premise here and that Texas decision was issued within hours, literally hours of the lo or bright decision coming down. But the, the the statutory provision for these exemptions we've been talking about for the last hour is based on the duties of the people that they that they perform in the course of doing their jobs. And for, you know, the, the, the salary argument as a kind of shorthand for the duties or you know, because salaries correlate with responsibility of course. But the salary thing is kind of crept in and now with these regulations it sort of displaces the duties. So I think that this regulation, even if there's not an administration change is going to be ripe for challenge by some group or industries or individual states. I think cases are pending in, in Nevada already, but I think it is going to be ripe for challenge. So Larry's absolutely correct as of July, we have these new rules. As of January one, it's still going to be the same administration. We have these new rules that ratchet up the salary level considerably, but I wouldn't sell life insurance to this regulation.

J. Larry Stine (45:37):
No. And I, and, and, and there is a real problem we had this last time some of the companies went ahead and made the commitments to the higher salaries that were in place. 'cause The 6 84 was not the original amount, it was actually higher. And once they made those commitments they were stuck pretty much with those raised salaries. Awful hard to go back. Mm-Hmm. Once I increased people to that salary and go nah, I'm gonna go back to 6 84 or 8 84 or whatever becomes a very difficult thing to do for companies. So they're kind of sitting there with a bit of a problem is, is there a decent chance of regulation will be overturned there? Is the regulation currently being enforced? It is. And you've got a choice on what to do at that point. Now if you make decisions by the way to keep 'em at the same salary and not exempt salaried and they blow out the salary limits finally and they really don't stand, then it's pretty easy to transition right back to exempt.

J. Larry Stine (46:50):
Because the salary will be the same and your employees will not have that much experience with overtime. And it's a little easier make that transition back if you use the non-exempt salary. I think there's a lot of benefits. If I was the employer, I think that's the one I would go to. I would recommend that if you use the non exempt salary, you put a memo either in their file or have 'em sign it, that they understand that they're non-exempt salary employee and the salaries intended to pay them for all hours worked above or below 40 hours, that would be very helpful to have something in the file to show that. That's because plaintiff lawyers still think there needs to be a written agreement or an agreement to that extent. And if you're trying to protect something and protect yourself, it'd be nice to have that memo even if the Supreme Court decision doesn't really mandate it, but it does seem to be a required by the, the interpreted ENT 7 7 8 0.1 4 4 1 1 14.

J. Larry Stine (47:51):
Excuse me. Well I don't have see any other question. What? I got another one. Hold on, let me just ask this one last one. Can I explain the inside sales exempt versus not exempt? Yes, I can, I'll do it. Let, let me explain. What happens is the inside salespeople, the people who come in every day and basically come to work, pick up the phone, start calling people, trying to sell them your product and at the end of the day they go home and they never make outside, outside, outside sales calls to your employees are considered inside sales. They don't qualify for the outside sales 'cause they don't go out. It's pretty easy to see. The problem is how, where do you get the exemption for the other exemptions? And the answers that you were going to would be the administrative exemption. They don't follow any executive 'cause they don't supervise, they don't follow in the professional 'cause There's not a college degree that's required for doing this.

J. Larry Stine (48:54):
So the exemption you gotta fit them in is the administrative exemption and the inside sales, the people who basically come to work make phone calls selling all day long and handling them or handling part of the sales process, the outside sales people generate don't qualify and therefore they have to be paid over time. It's easier in my mind particularly 'cause you go into a lot of these and they've been paid as salaried exempt and they're not is to change them to non-exempt salary. I hope that answers your question and thank you for the question. I appreciate it. I'm certain more people wanted to have the same question. Are there any other questions? I don't think so. I think we made all the comments we can and we will send out the, the slide deck for you. So you can have that and thank you very much. And with that we will adjourn and thank you very much. Thank you.