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Proposed changes to the Fair Labor Standards Act

August 2, 2015

Diana Moroney, SPHR® Senior Human Resources Consultant

Since the Fair Labor Standards Act (FLSA) applies to most every employer and employee, proposed changes in the Act have sparked a lot of interest! We could all be in for a monumental change from the Department of Labor (DOL) with regards to the future of FLSA exemptions. Employers need to be aware of how these changes may impact their company.

The proposed rule:

The newly proposed rule impacts the salary basis affecting the exemption tests employers must apply to determine if employees are exempt from the minimum wage and overtime requirements of the FLSA.Last raised in 2004, the current minimum salary level required for the exemption is $455 per week or $23,660 per year. Today, if an employee meets that salary test, then the work an employee performs is evaluated using a “duties test”, to determine whether the position itself is of the type which could be considered exempt. Also under the current rule, certain highly compensated employees (those making a salary of $100,000 per year or more) are automatically exempt.
The proposed revision would:

  • Increase the salary threshold to $970 per week or $50,440 per year – more than doubling the current amount
  • Increase the highly compensated test to determine exempt status, raising the salary bar from $100,000 to $122,148

The public now has the opportunity to express written comments on the proposed rule at www.regulations.gov on or before September 4, 2015.

What matters now?

This proposed rule has the opportunity to have a huge impact in business in the U.S. However, as we’ve learned in the past, until such time the ruling has passed, it is important for companies to focus on what is in their control, giving employers a chance to correct errors if they have been incorrectly classifying employees up to this point. So where should employers focus?

  • Review the ruling. If concerns, use the link and timeframe noted above to submit written viewpoints.
  • Update position descriptions. These are the most common and effective ways to capture the essential position duties. If you don’t have position descriptions or if you have them but haven’t reviewed or revised them recently, consider focusing attention in that direction. Having current and valid position descriptions that also include exemption status (exempt or non-exempt), is essential and will assist organizations in being well prepared to apply the new exemption rules and be more confident in their decisions. It is also a great first defense in the event of an FLSA/DOL audit. Also keep in mind the importance of having employees review and sign-off on the revised position descriptions to ensure the employee has acknowledged the expectations of their position, and you maintain documentation of that acknowledgement.
Other reasons to maintain current position descriptions:

Accurate and signed position descriptions are instrumental in risk mitigation for workers compensation and unemployment claims, and/or defending unfair employment practices. All of the following should be considered during the revision process:

  • Title VII of the Civil Rights Act of 1964. By choosing the best candidates based on factors that are relevant, as noted in the position description, you’ll be able to better prove that employment decisions were made based on the ability to perform the position, not based on illegal, discriminatory factors.
  • Occupational Safety and Health Act (OSHA). By describing the working conditions in your position description, you also explain how to safely perform the position, and its requirements on performing physical or hazardous activities.
  • Equal Employment Opportunity. Be sure your position description allows you to conduct a fair interviewing and hiring process without excluding any groups of potential candidates.
  • Age Discrimination in Employment Act. Position descriptions should not discriminate on the basis of age unless there is a valid reason for doing so.
  • Americans with Disabilities Act. The position description can be a vital component in determining the essential functions of the position when working out reasonable accommodations for disabled individuals. It should directly specify the essential and non-essential position functions including a position’s physical requirements and environmental components, and should be periodically reviewed for accuracy.

Maintaining awareness of this pending legislation, and taking proactive steps in preparing for it, will ensure your organization will not be caught off-guard. Revisiting and, if necessary, revising current position descriptions will prove to be time well spent regardless of the outcome.

If you have questions regarding the proposed changes to the Fair Labor Standards Act, contact Lori Stewart, HR consulting manager, at 888-556-0123.

This article was previously published in the September 2015 Tri-State Business Times.

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