Significant changes to the Federal overtime rules will mean more employees may be entitled to overtime pay. This is the result of changes to the so-called “white collar” overtime exemption regulations under the Fair Labor Standards Act (FLSA). These changes will go into effect on December 1, 2016.
The FLSA ensures a minimum wage and overtime for many employees. However, the FLSA allows employers to treat certain employees as “overtime exempt” if the employee: (1) is paid on a salary basis not subject to reduction because of quality or quantity of work performed, (2) receives a salary that meets or exceeds a specified amount (minimum salary level threshold), and (3) performs job duties that primarily involve work associated with executive, administrative, or professional duties. All three criteria must be satisfied to properly claim the exemption. This exemption is often referred to as the “white collar” exemption.
The minimum salary level threshold required to claim the “white collar” exemption, currently $455 per week ($23,660 per year), will significantly increase to $913 per week ($47,476 per year) as of December 1, 2016. This means that an employee who does not earn at least $913 per week will not be eligible for the “white collar” exemption.
The above is just an overview of some of the changes. Some other changers include: changing the minimum salary level threshold, the new rule permits employers to use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the new minimum salary level threshold; providing that the minimum salary level threshold will be automatically updated every three years; and changing the highly compensated employee exemption. Notably, the new rules do not make any changes to the job duties that an exempt employee must perform in order to be exempt.
Compliance with the FLSA rules is a business necessity, but can be confusing to even seasoned business people. So, what can you do? First, you should evaluate your salary and compensation plans for all exempt employees and make any necessary adjustments to assure your continued compliance with the FLSA regulations regarding your employees’ entitlement to overtime pay. Second, if you are uncertain or confused about FLSA compliance or what these changes mean for your business, you should seek professional guidance from a law firm familiar with the new rules.