What s your agency s exposure on new overtime ruling? webinar 10:00 11:30 a.m. Pacific Time, Wednesday, August 3, 2016 CSMFO Coaching Program A June 2, 2016, 9 th Circuit ruling held that local government agencies must include cash payments made to employees in lieu of benefits in calculating regular rate of pay and overtime. Whether you have such cash-in-lieu-of-benefits payments or not, you will want to know the implications of this ruling for potential financial impacts and negotiating issues. Advance registration required for this no-charge webinar: https://attendee.gotowebinar.com/register/2308144662864196355 Webinar topics: 1. What does the June 2, 2016, 9th Circuit ruling mean for including cash payments made to employees in lieu of benefits in calculating regular rate of pay and overtime? 2. How do you determine if your agency has an exposure and how much? 3. What's prudent to do in establishing reserves, negotiating labor agreements, etc. to manage your agency's exposure? Presenter: * Art Hartinger, Partner, Public Law Group CSMFO Color Commentator: * Harriet Commons, CPA and retired Finance Director, Fremont Audience: local government finance professionals and their human resource colleagues Get connected with these steps. 1. Register in advance for the webinar: There is no charge for participating in the webinars, but each requires advance registration. *** Advance registration required for this no-charge webinar: https://attendee.gotowebinar.com/register/2308144662864196355 Be sure to "white list" or "allow" emails from customercare@gotowebinar.com to receive notices for this webinar. 2. Connect with the webinar and audio: Use your logon information from the email confirmation you receive via email from GoToWebinar. We recommend the telephone option dial-in number provided by
GoToWebinar for sound quality. Depending upon your internet connection, VOIP option for audio (computer speakers) can have delays or sound quality issues. 3. Ask questions: You may submit questions anonymously via email to CSMFO@DonMaruska.com in advance or via the webinar during the panel discussion. As moderator for the session, Don Maruska will pose the questions. 4. Presenters presentation materials: We post these with the agenda at Agendas & Archives tab of www.csmfo.org/training/webinars. The PPT will be available 24 hours before the webinar. After a webinar occurs, a digital recording along with the PowerPoint materials and results of the polling questions will be available after 24 hours at the "Agendas & Archives" tab of www.csmfo.org/training/webinars. CPE Credits: If you are a member of CSMFO and wish to obtain CPE credit, you need to register and attend in your name, respond to at least 75% of the live polling questions, and pay $25 to CSMFO after notice from CSMFO following the webinar. After payment, CSMFO emails the CPE certificate as a PDF. Post-Webinar Group Discussions Many agencies are organizing groups to participate in the webinars (live or recorded) and discuss the topics among themselves after the webinars. Some are summarizing their discussions and distributing them to managers throughout their organizations. Use the CSMFO Coaching Program as an effective way to enhance professional development in your agency. Here are some discussion starters for this session: Post-webinar discussion questions: a. What's our agency's current exposure to this ruling if it's upheld? b. Even if we don't currently have an exposure, what's the guidance to our agency regarding future labor agreements? c. What actions do we want to recommend to establish reserves, negotiate labor agreements, etc.? MORE RESOURCES--See the "Coaching Corner" at www.csmfo.org/coaching for valuable resources to boost your career. These include a Financial Management Skills Inventory, Resource Matrix, Coaches Gallery of 24 volunteer CSMFO Coaches willing to help you on a one-to-one basis, and an archive of digital recordings and materials from past webinars at www.csmfo.org/training/webinars. Enjoy the resources to help you succeed in local government finance. Don Maruska, MBA, JD, Master Certified Coach Director, CSMFO Coaching Program; CSMFO@donmaruska.com Author How Great Decisions Get Made and Take Charge of Your Talent www.takechargeofyourtalent.com
Art Hartinger, Partner, Public Law Group Arthur (Art) Hartinger is one of California s leading labor and employment attorneys. He has been designated by the Daily Journal as one of the Top 75 Labor & Employment Attorneys in 2013 and a Northern California Super Lawyer each year since the inception of the award in 2004. Art was also selected by the Daily Journal as one of the Top 20 Municipal Lawyers in California for 2011, 2012, and 2013, and in 2012 he was named one of the Top 100 Lawyers in California. He represents public and private clients in complex state and federal litigation pertaining to all types of labor and employment issues, including California and U.S. Constitutional Law, the Fair Labor Standards Act (FLSA), Title VII, Title IX, the Fair Employment and Housing Act (FEHA) and the Americans with Disabilities Act (ADA). In his 30-year career, Art has represented clients in a variety of litigation matters, including class actions, writs and jury trials. His litigation practice also includes administrative and binding arbitration hearings before personnel boards, arbitrators and administrative law judges, and also advising personnel boards and civil service commissions. Art is also experienced in labor relations, negotiations and workplace investigations. As a lead negotiator in collective bargaining, he has represented numerous employers in negotiations with deputy sheriffs, police and fire personnel, managers, service employees, laborers, attorneys, and other professional and service employees. His public agency and nonprofit clients have included: the City and County of San Francisco; the City of Los Angeles, Chabot Space and Science Center; the cities of Tracy, Stockton, San Jose, Fremont, Sunnyvale, Berkeley and Long Beach; various special districts, including the. Santa Clara Valley Water District; and various California counties, including Alameda, Kern, Marin, Mendocino and Tuolumne. University of San Francisco, School of Law, JD University of California, Berkeley, BA Harriet Commons, CPA and retired Finance Director, Fremont, CA
What s your agency s exposure on new overtime ruling? Coaching Program August 3, 2016
Coaching Program: 18 th year as member benefit Career Development Committee 2
Overview of Session Topics: 1. What does the June 2, 2016, 9th Circuit ruling mean for including cash payments made to employees in lieu of benefits in calculating regular rate of pay and overtime? 2. How do you determine if your agency has an exposure and how much? 3. What's prudent to do in establishing reserves, negotiating labor agreements, etc. to manage your agency's exposure? Presenter: * Art Hartinger, Partner, Public Law Group Color Commentator * Harriet Commons, CPA and retired Finance Director, Fremont, CA Moderator: * Don Maruska, Director, CSMFO Coaching Program 3
Polling Question #1 How many persons are participating at your location? 4
What s Your Agency s Exposure? A New Overtime Ruling Presented by Arthur A. Hartinger, Partner Public Law Group
Flores vs. City of San Gabriel Issues: Affects what cash payments must be included in calculating the regular rate of pay City s conduct was found to be willful thus extending the statute of limitations to three years
Background Regular Rate of Pay What is the regular rate of pay and why do we care? The Fair Labor Standards Act (FLSA) requires overtime pay for all hours worked over forty in a seven day period. Exceptions include: exempt employees, and other methodologies for calculating the overtime threshold, such as the 7K exemption for public safety
The Regular Rate of Pay Cannot simply pay 1.5 x the base rate. It is the hourly rate actually paid the employee for the normal, nonovertime workweek for which he is employed. The regular hourly rate of pay of an employee is determined by dividing an employee s total remuneration for employment (except statutory exclusions) by the total number of hours actually worked in that workweek.
Exclusions from the Regular Rate (Generally This is Not A Comprehensive Description) 29 U.S.C. sec. 207(e) Gifts not dependent on hours worked Pay for when no work performed Expenses Payments made to a bona fide plan for healthrelated insurances and life insurance Overtime Payments
Polling Question #2 Is overtime a major issue for your agency? 10
City of San Gabriel At issue: The City provided a Flexible Benefits Plan for the purchase of medical, vision and dental benefits. All employees were required to use a portion of funds to purchase vision and dental benefits.
City of San Gabriel Flexible Benefits Plan The Plan included a cash in lieu feature An employee could decline to use the remainder of funds to purchase medical benefits only upon proof of alternative coverage, such as through a spouse If the employee elected to forego medical benefits, the employee could receive the unused portion of benefits as a cash payment added to the regular pay check
Percentage of Cash Contributions Approximately 45% of total plan contributions was paid in cash for unused benefits.
Polling Question #3 Does your agency have a cash in lieu benefit? 14
The Issue Was the cash paid in lieu of medical coverage required to be included in the regular rate? Holding: Yes
The Court Rejected Application of Possible Exclusions payments made for occasional periods when no work is performed due to vacation, holiday, illness, failure of the employer to provide sufficient work ; reasonable payments for traveling expenses, or other expenses and other similar payments to an employee which are not made as compensation for his hours of employment. (29 U.S.C. sec. 207(e)(2))
Holding The Court rejected the City s argument that the in lieu payments were not tied to hours worked, and therefore could be excluded If the pay may be generally understood as compensation for work, even though it is not directly tied to specific hours, it does not qualify for this exemption
Second Exemption at Issue Section 207(e)(4) contributions irrevocably made by an employer to a trustee or third person pursuant to a bona fide plan for providing old age, retirement, life, accident, or health insurance or similar benefits for employees.
Holding Cash in lieu payments were not made to a trustee, or third party, and therefore they did not meet the requirements for application for the exclusion As to those benefits made directly to a third party, the Court found that the plan was not bona fide
The Plan Was Not Bonafide The DOL interpretative bulletin provides that cash payments will not render a plan not bonafide if the payments are incidental The Court rejected a 2003 Opinion Letter that set 20% cash as the threshold for maintaining a bona fide plan. Neverthless, the Court found that forty percent or more of cash in lieu payments rendered the plan not bonafide
Consequences All in lieu cash payments must be counted toward the regular rate All contributions paid toward the Flexible Spending Account must be included toward the regular rate, even if the payments were not made in cash
Polling Question #4 Does your agency have a Flexible Spending Account benefit? 22
Case Status Flores v. City of San Gabriel The decision was filed June 2, 2016, but it is not final The City filed a petition for rehearing, or rehearing en banc, on June 16, 2016 The Ninth Circuit has ordered plaintiffs to respond
Timing The Ninth Circuit has no deadline to rule on the petition for rehearing The City has 90 days to file a petition for writ of certiorari to the U.S. Supreme Court, which time is tolled
Implement Flores or Wait? Discussion About Options Phase out the benefit Programmatic changes Controlling overtime Tolling requests
Polling Question #5 What approaches do you think are appropriate for your agency to consider? 26
Post-Webinar Discussion Questions a. What's our agency's current exposure to this ruling if it's upheld? b. Even if we don't currently have an exposure, what's the guidance to our agency regarding future labor agreements? c. What actions do we want to recommend to establish reserves, negotiate labor agreements, etc.? 27
Contacts for today s webinar Presenter: * Art Hartinger, Partner, Public Law Group ahartinger@publiclawgroup.com Color Commentator * Harriet Commons, CPA and retired Finance Director, Fremont, CA hcommons@comcast.net Moderator: * Don Maruska, Director, CSMFO Coaching Program CSMFO@donmaruska.com 28
Polling Question #6 How was the webinar of value for you and your agency? 29
Resources and Feedback A digital audio recording of the session and an Agenda packet with PDF of the PPT with polling results and other materials will become available in ~ 24 hours at the Agendas & Archives tab of www.csmfo.org/training/webinars Other coaching resources, including volunteer one-to-one coaches are available at www.csmfo.org/training/coaching Please complete the follow up survey, including suggested topics for 2016 webinars. 30
Upcoming Webinar Protecting Your Agency from Fraud 10-11:30 a.m., Wednesday, September 7 Register now: https://attendee.gotowebinar.com/register/4208170025136089859 or go to www.csmfo.org/training/webinars 31
Polling Results from What s your agency s exposure on new overtime ruling webinar August 3, 2016 234 locations; 547 estimated participants in live audience
Resources Art Hartinger identified to research questions about what s included in regular rate of pay for overtime consideration under FLSA Here is the Link to Wage and Hour Contacts: https://www.dol.gov/whd/contact_us.htm Here is the Link to Opinion Letters: https://www.dol.gov/whd/opinion/opinion.htm Here is the Link to Thompson s FLSA Compliance Guides: http://thompson.blr.com/product-type/publications/wage-and-hour Here is the Link to the CPER Guide: http://cper.berkeley.edu/pocketguide/local.html