If you haven’t yet taken action to ensure your organization’s compliance with the Department of Labor’s new FLSA overtime regulations, you need to act now. It’s just a month until employers will be issuing the first payroll affected by the new rules. According to the Department of Labor, 4.2 million workers will be entitled to new overtime protections or will get a raise as a result of the new regulations, which take effect December 1.
As you may have seen in media reports, there is a chance this may all go away before December 1. An emergency motion to enjoin and delay implementation of the rule will be heard next week in a suit brought in a Texas federal court by 21 states. We’ll all be watching that carefully, of course, but we don’t recommend that employers count on a last minute reprieve. If you are an employer currently subject to the FLSA you need to be planning to comply now.
Among other important changes, the new rule raises the salary threshold for exempt employees to $913 per week, or $47,476 annually. That’s more than the double the current salary level threshold of $455. Nondiscretionary bonuses and incentive payments (including commissions) may be used to satisfy up to ten percent of the new standard salary level. The new rule also increases the salary level at which employees are designated as highly compensated workers to $134,004 and establishes a mechanism to automatically update the salary and compensation levels every three years.
The three major categories of workers exempt from the FLSA overtime rules—executive, administrative, and professional employees—will remain the same. The new, higher salary level requirement is in addition to the exemption qualifications, and is not a replacement for them. If an employee’s salary is less than $47,476, nonexempt status is presumed and overtime is required. If an employee’s salary is more than $47,476, the position must still qualify as exempt based on the employee’s job duties.
So what do you need to do?
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Identify all employees earning less than $47,476 and determine who is working more than 40 hours per week. If an employee is currently exempt from overtime and earns less than $47,476 per year, you will have to change how the employee is paid. Either raise the employee’s salary above the $47,476 level, or prepare to treat the employee as nonexempt and pay overtime.
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Maintain time records for all employees. If you don’t already have one, implement a system for tracking the number of hours worked by each employee each day. Remember that time records need not be paper—technology can help.
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Communicate these changes to affected employees. A change in classification may require advance notice. Keep in mind also that changing from salaried to hourly may be difficult for some employees. Remind the employees that salary is not a reflection of value to an organization, it is just a way of paying workers. And when in doubt, blame the changes on the Department of Labor.
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Document, document, document. Keep records relating to your organization’s compliance with the new requirements. Record how decisions were made, particularly those relating to exempt status. Keep records of information and instructions about wage status given to employees.
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Don’t forget to check state laws. If a state establishes a more protective standard than the FLSA, the more employee-friendly standard applies.
