Special Edition of HR Alerts: FLSA Overtime Rules Q&A
On May 18, the Department of Labor announced the new salary threshold for certain employees to qualify as exempt from minimum wage and overtime under the Fair Labor Standards Act’s White Collar Exemptions.
Effective December 1, 2016, the new minimum salary level will be $47,476 per year ($913 per week).
The minimum salary requirement applies to all white collar workers who are classified as exempt executive or administrative employees, and to many who are classified as exempt professional employees.
More about the rule:
- The salary threshold will increase every three years.
- It is expected that the next change, which will be effective January 1, 2020, will increase the minimum salary to approximately $51,168.
- The duties tests for the White Collar Exemptions have not changed.
- Come December 1, the federal minimum salary level will be higher than any state-mandated minimum, and therefore must be followed.
We’ve been hosting free webinars on this topic and here are some of the questions we’ve received (with our answers). We have one more webinar scheduled for July 14 at Noon Eastern Time. Register here!
Question: Are there exceptions (for small companies, nonprofits or churches) to the FLSA overtime rule changes?
Answer: Almost every organization and employee is subject to the Fair Labor Standards Act (FLSA). Since the new overtime rules were released in May, many employers have been asking if there are exceptions for small companies, nonprofits, or churches. The answer is no – there are no special carve-outs. There are two ways in which employers and employees can be covered by the FLSA; if either applies, then so do all of the FLSA rules.
The first kind of coverage is called enterprise coverage. This applies when an employee works for an employer who has an annual dollar volume of cash sales or business done of $500,000 or more (this doesn’t include charitable donations, but does look at any for-profit side business run to maintain a non-profit, like a book store). Enterprise coverage also applies if the employer is a hospital, business providing medical or nursing care for residents, school or preschool, or government agency, no matter the volume of business.
The second type of coverage is called individual coverage. Even when there is no enterprise coverage, the FLSA will cover individuals engaged in interstate commerce. If an employee makes goods that will be shipped to other states, sends or receives out-of-state shipments, places telephone calls to another state, or partakes in any number of other basic business activities that help things, money, or information cross state lines, they will qualify for individual coverage. This even includes running credit cards and processing checks.
More Info: Here is a link to the important FLSA fact sheets on this topic. Go to this page on the DOL’s website and scroll to the bottom. There you will find the Overtime Final Rule fact sheet as well as specific guidance for Non-Profits, Higher Education, and State and Local Governments.
Question: Can we include bonuses towards calculating the $913//week salary level?
Answer: Yes, but only certain types. Up to 10% of this income may come in the form of non-discretionary bonuses, incentive pay, or commissions, as long as that portion of the compensation is paid at least quarterly.
Question: Has the “duties test” for determining exemption status changed?
Answer: No. The DOL has stated that while no specific changes are proposed for the duties tests, they have expressed concerns with the current duties tests. In other words, they haven’t made any changes yet. The current definition of “primary duty” is still the “principal, main, major or most important duty that the employee performs”
Question: What are my options to address these changes within my workplace?
Option 1: Raise the salary of all employees paid under the new level to the minimum.
Option 2: Change employee status to a non-exempt and convert salary to hourly.
Question: What else can I do to get ready for these changes?
Answer: Start your preparations now by doing the following:
- Create a timeline for decisions
- Communicate to employees what you’re planning to do
- Identify employees who need to be reclassified
- Develop new compensation plan for the reclassified employees
- Review & update wage-hour policies and processes, including “after hours work”, “electronic device usage”, “telecommuting”, “off-the-clock work”, travel and overtime policies
- Update position descriptions and identify correct classification – exempt or non-exempt; If you don’t know, let us help you with that
- Communicate the changes
- Train the reclassified employees and their managers
Still have questions?
Participate in our final webinar on this topic on July 14 at Noon EST. Register here.