There has been a lot of hoopla and panic about the new FLSA rules. In fact, few employers seem to understand how these new rules will affect them and their employees. Here is a quick tutorial:
What are the new rules?
The new rules raise the minimum salary required to claim an exemption to the FLSA minimum wage and overtime rules under the professional, administrative and executive exemptions. The new rules requires employees to earn a salary of at least $913 per week ($47,476 a year), up from $455 per week ($23,660 a year), to be exempt. The new salary level is equivalent to the 40th percentile of full-time salaried workers in the lowest wage census region nationally. In addition, the new rules raise the threshold for the highly compensated employee exemption to $134,004, which is the 90th percentile of full-time salaried workers nationally, up from $100,000.
These new salary thresholds will be adjusted automatically every 3 years to maintain them at the same percentile levels.
When do the new rules go into effect?
The new rules become effective on December 1, 2016. After that time, salaried employees who do not meet the new thresholds must be paid overtime for any hours worked in excess of 40 per week.
How will this affect me?
Simply put, employers must evaluate their workforce and determine which employees are affected by these new rules. Exempt employees who earn above the new thresholds will not experience any change. It is important however, to make sure that these employees' duties actually qualify under one of the exemption tests. If not, regardless of salary, the employees are as non-exempt. Those employees whose salary fall between the old and new thresholds will be most affected. Employers may continue to pay these employees by salary, but most also keep track of and pay overtime for any hours worked in excess of 40 per week.
Although the short-term effects seem to be increasing the take-home wages of some employees and the cost for employers, a lot remains to be seen regarding the longer-term effects of the new rules. While some newly non-exempt employees will have their overall pay increased by overtime, others may lose their jobs or effectively become more restricted in their work environment by their employers' efforts to contain costs and avoid overtime (employees with less flexibility may lose out on some projects). Others, near the threshold, may receive an immediate small increase in salary so as not to bump them down to non-exempt status. Much remains to be seen and there is no shortage of reasonable opinions and projections.
How should I get ready?