Department of Labor announces long-awaited FLSA regulations
May 24, 2016
By Lori Stewart, SPHR®, SHRM-SCP, HCS, Partner, Human Resources Consulting
On May 18, 2016, the Department of Labor (DOL) announced the Fair Labor Standards Act’s (FLSA) regulation updates. “The Overtime Rule,” as it has been dubbed, will take effect on December 1, 2016. This allows employers roughly six months to analyze and implement any changes to their employee classifications to determine exempt or non-exempt status.
When the DOL first released the proposed changes mid-year 2015, they provided a two-month comment period which resulted in approximately 250,000 comments representing a sharp divide in opinion. Supporters argue this will put money in the pockets of millions (approximately 4.2M) of workers who are considered underpaid, while those opposed believe it will significantly hurt businesses due to higher expenses. It is estimated that an extra $1.2 billion will be paid to employees who are not, at this point, eligible for overtime.
Whether you are for or against the legislation, you will need to consider the details of the new regulations and make some decisions as to how you will ensure your compliance.
The final rule, effective December 1, 2016, includes the following:
- Raising the current salary level from $23,660 ($455 weekly) annually to $47,476 ($913 weekly).
Up to 10% of the salary threshold for non-Highly Compensated Employees (HCE) can be met by non-discretionary bonuses, incentive pay or commissions, provided the payments are made at least on a quarterly basis.
- Raising HCE from $100,000 to $134,004 annually.
- Automatically updating the salary threshold every three years.
- Duties test for executive, administrative and professional employees remains the same.
What actions can you take to help prepare yourself?
- Consider any organizational changes to align with your business needs.
- Review and update your current position descriptions to ensure they are accurate, and you have the right essential duties assigned to the appropriate positions.
Determining exempt or non-exempt status, specifically when it comes to the administrative exemption, can be complicated. It is imperative you classify them correctly.
- Conduct an analysis of those positions and determine whether you will:
-Pay time-and-a-half for overtime
-Limit employees’ hours to 40 per week
-Raise employees’ salaries above the new threshold
-Hire additional resources
-Some combination of the above
Taking the appropriate steps to ensure you are in compliance with these new regulations within the next six months will be crucial to the future of your business. Consider all of your options to determine which course of action is right for you and begin implementing the changes accordingly.