Although certain members of Congress are trying to have the rule postponed, in May 2016, the Department of Labor significantly modified the criteria for exemption from the Fair Labor Standards Act (FLSA.)
On May 18th, 2016, the Department of Labor published its final rules on several fronts, highlighted below, effective December 1, 2016:
- Updating overtime regulations, extending eligibility for overtime to millions of workers,
- Subjects highly compensated employees (HCE) to a minimal duties test, and
- Provides for new, automatic updates for compensation levels for FLSA rules.
This blog post will focus on the first topic which we believe will have the biggest impact to businesses and employees alike.
According to TSheets, 4.2 million employees will instantly qualify for overtime on December 1, 2016.
What this Means to You
If you have staff working for you that are currently considered exempt from the FLSA but earn between $23,660 and $47,476 annually, you will need to take some measures to ensure compliance with the new rules. Some options can take the form of:
- Changing affected employees’ status from exempt to non-exempt. This will require tracking their time and paying time-and-a-half for hours worked in excess of the standard hours per week. Each state has different rules to define a workweek, so please be sure to check into the state your employees live in for the proper definition. Additional considerations include updating your employee handbook to address overtime, especially requiring advance approval to work in excess of 40 hours per week.
- Increase the affected employee’s salary to equal $47,476 or above. Depending on their current salary, this may be more cost-effective than having to track hours, manage overtime policies, and pay the overtime when applicable.
As CPA’s and payroll professionals, we are always prepared to help you with compliance issues, but in this instance, we recommend getting in touch with your HR professional or employment attorney to ensure your business is ready for the change. As soon as you settle on your business’s approach, feel free to contact us to execute!