Fair Labor Standards & the New Final Rule
Some major topics discussed at the 2016 Iowa Chamber of Commerce Executives Fall Conference was the Fair Labor Standards and the new Final Rule changes. The following is a recap of information I have gathered, but as always - for official information - look to the federal register.
On May 18, 2016, President Obama and Secretary Perez announced the publication of the Department of Labor’s final rule updating the overtime regulations, which will automatically extend overtime pay protections to over 4 million workers within the first year of implementation. President Obama signed a Presidential Memorandum directing the Department of Labor to update the regulations defining which white collar workers are protected by the FLSA's minimum wage and overtime standards. Consistent with the President's goal of ensuring workers are paid a fair day's pay for a hard day's work, the memorandum instructed the Department to look for ways to modernize and simplify the regulations while ensuring that the FLSA's intended overtime protections are fully implemented (source: U.S. Department of Labor).
So, what does this mean for our local businesses? There will be some changes in classification of employees. To ensure workers are compensated fairly for their work the U.S. Department of Labor is raising the threshhold of what is to be considered "salary" based on pay structure, pay levels and the duties assigned to those positions.
Who is exempt?
Since 1940, the regulations implementing the exemption have generally required each of three tests to be met for the exemption to apply:
1. Salaray Basis Test - The employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed.
2. Salary Level Test - The amount of salary paid must meet a minimum specified amount. The new salary exemption threshhold is $913 per week, or $47,476 annually for a full-year worker. This number is based on data from the fourth quarter of 2015.
3. Duties Test - The employee's job duties must primarily involve executive, administrative, or professional duties as defined by the regulations.
What are our choices?
For those employees who are currently classified as "salary," but being compensated less than the $47,476 annually, you can decide to raise them to the new threshhold or pay them overtime for working more than 40 hours per week. Depending on your situation and the amount of overtime employees are working, it may save you money to raise compensation rather than dish out money to employees who consistently work more than 40 hours per week.
I am going to refrain from getting into more details - I know this information will vary depending on what industry you are in and I won't claim to be an expert! Here are some resources that can help to understand more fully how this will affect your business:
Final Rule - Overtime Webinars: https://www.dol.gov/whd/overtime/final2016/webinars.htm
Final Rule - Overtime Fact Sheet: https://www.dol.gov/whd/overtime/final2016/overtime-factsheet.pdf
Compliance Reference Guide: https://www.dol.gov/whd/regs/compliance/wh1282.pdf