By now most employers are (hopefully) aware that the U.S. Department of Labor has significantly changed some of the rules governing exemptions from the overtime pay requirements of the Fair Labor Standards Act (“FLSA”). The revised regulations will go into effect on December 1, 2016, and they will principally do the following:
- Immediately double the minimum salary threshold for the “white collar” exemptions to $913 per week ($47,476 annualized)
- Adjust the minimum salary threshold for inflation every three years
- Change the way the minimum salary threshold is calculated so that employers can count certain bonuses and commissions toward as much as 10% of the threshold
- Set the total annual compensation requirement for the highly-compensated employee exemption to the annual equivalent of the 90th percentile of full-time salaried workers nationally (i.e., $134,004)
Needless to say, these unprecedented changes present significant challenges for employers. Given the potential consequences of noncompliance it is essential that employers act immediately to ensure they have taken all necessary steps to comply with the new regulations prior to December 1st. While each workplace will be different, some general suggestions that employers should consider include the following:
- Immediately identify exempt positions that fall below the new minimum salary threshold and consider
- Who will get a pay raise to maintain the exemption
- Who will be reclassified as non-exempt
- For reclassified employees, study the employees’ average hours worked for purposes of setting new pay rates
- Given the likelihood of increased litigation and stepped up DOL enforcement, consider reclassifying other “vulnerable” positions
- Ensure accurate timekeeping of all hours worked
- Train reclassified employees, many of whom will be uncomfortable with or resistant to tracking their hours worked
- Train managers
- Address “bring your own device” issues (e.g., after-hours e-mails, texts, and phone calls)
- Review and update policies and procedures
- Policies related to overtime
- Policies related to recording hours worked
- Communicate the changes to your workforce
- Plan for future inflation-driven adjustments to the minimum salary threshold to the extent possible