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Employers

Fair Labor Standards Act

Exempt or Non-exempt: Understanding the FLSA Overtime Updates

In 2016, the Department of Labor updated the Fair Labor Standards Act (FLSA) in an effort to extend overtime pay eligibility to more workers. The new rules update the salary and compensation levels needed for certain “white-collar” employees to be classified as exempt, making more employees potentially eligible for overtime pay- which could put your company at risk for noncompliance and affect your bottom line.

The new rules go into effect on December 1, 2016. The links below offer further information on the new rules, as well as job duty tests to determine if an employee is exempt or eligible for overtime compensation.

The Final Rule- 2016

In an effort to update the interpretation of the FLSA for the modern workplace and inflation, the enforcing entity of the FLSA, the Wage and Hour Division of the DOL, revisited the salary level threshold for the “white-collar” exemptions, and on May 18 2016, increased the threshold and introduced automatic increases designed to combat the effects of inflation in the future.

The biggest change from the May 2016 final regulations is that the minimum salary amount for certain exempt employees- those who don’t require overtime pay- will double from $455 per week ($23,360 annually) to $913 per week ($47,476 annually). The DOL projects that, under this new rule, more than 4 million people will either have their weekly salary increased to the new minimum requirements or become eligible for overtime compensation at the time the final rule goes into place.

The Fair Labor Standards Act Info Sheets

Complying with the FLSA

These new changes to salary standards could mean that some of your employees who are currently classified as exempt may no longer be exempt unless compensation changes are made and may be eligible for overtime pay. To ensure your business is compliant with the new regulations, consider this:

  • The FLSA allows exemptions to the minimum wage and overtime requirements for bona-fide “white-collar” jobs (executive, administrative, and professional jobs). Most other types of employees are eligible for overtime pay. Exemptions do not apply to law enforcement, fire fighters, emergency medical workers or first responders.
  • To qualify for an exemption, each employee’s primary duties must involve the kind of work associated with the exempt executive, administrative or professional roles as they are defined by the DOL. (See below.) This means that, regardless of whether you make compensation changes under the new rules, employees must be performing “exempt work” to satisfy exemption tests. There are no changes to the duties test under the new rule.
  • Additionally, non-discretionary bonuses, incentive payments and commissions can account for up to 10% of the standard salary level of $47,476 annually.

Job Duty Tests by Occupation

 

Find the FLSA Exempt/Non-exempt Flow Chart Test HERE

For more information on this topic, contact Mike Heffner, local Franchise Owner of Express Employment Professionals @ Mike.Heffner@expresspros.com or 812.376.2425.