Is Your Business Ready for Upcoming Changes to Overtime Regulations?

The United States Department of Labor’s changes to the overtime regulations of the Fair Labor Standards Act (“FLSA”) take effect December 1, 2016. Is your business ready?

Employers with salaried employees earning under $47,476 annually should immediately evaluate the impact on their organizations of the major changes to employee compensation following the new federal wage requirements. Under the new federal rule, most salaried employees earning less than $913 a week must be paid time-and-a half for more than 40 hours of work in a week, unless the employee is covered by another exemption. Employers covered by the FLSA, which are most, must comply with the rule by December 1, 2016 or they could face significant penalties from the Department of Labor.

Pursuant to its authority under the FLSA, the United States Department of Labor has detailed the sorts of duties that do, and do not, qualify as exempt managerial, professional or administrative. The final rule, “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees,” is applicable to employees working under the executive, administrative, professional, and highly compensated exemptions, often called “white collar” exemptions. In order to qualify, the employee must:

1. have a primary duty of the performance of office or non-manual work directly related to the management or general business operations;
2. have independent discretion with matters of significance or supervise two or more employees; or
3. be in an advanced field of science or other specialized prolonged education background, a specialized creative artistic field, a school teacher, or a computer analyzer, programmer or engineer.

In addition to meeting those duties requirements (“the duties test”), managerial, professional, and administrative employees must be paid on a salary, not hourly, basis in order to be exempt from the overtime pay requirement. The Department of Labor describes a salary basis as meaning “the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed.” It means that with certain exceptions (for example, deductions made in accordance with a bona fide plan, policy or practice of providing compensation for loss of salary occasioned by sickness or disability), the employee must receive his or her full salary for any week in which the employee performs any work at all.

By December 1, when the new regulations become effective, employers need to be in compliance. If your business hasn’t already, over the next 75 days, it must plan accordingly to make appropriate revisions to company documents and accounting systems so as to ensure compliance with the new FLSA regulations.

Attorney Aaron L. Davis

Questions? Contact us to learn more.

For questions or further clarification regarding this ruling, contact attorney Aaron L. Davis at 517.377.0822 or Aaron’s legal practice includes a diverse range of employment matters, including Title VII, the Age Discrimination Employment Act, the Americans with Disabilities Act, the Family and Medical Leave Act, and the Fair Labor Standards Act. 

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