Wage and Overtime Rules are Changing!

Posted by on Oct 23, 2015 in Blog | 0 comments

The overtime exemption rules are changing and the financial impact may be felt by employers and employees possibly beginning as early as mid-2016. In March 2014, President Obama signed a Presidential Memorandum authorizing the United States Department of Labor (DOL) to revise the current regulations regarding the wage and overtime rules of the Fair Labor Standards Act (FLSA). This Act is regulated by the Wage and Hour Division within the DOL. In general, employers that have a “gross volume of sales made or business done of $500,000 or more are covered by the FLSA”. There are some exceptions to this coverage, but not many.

Revisions to the FLSA are nearly certain to happen, but the specific details of the key provisions are still being finalized by the DOL. What we don’t know yet includes:

  • What the Final Rule changes will be
  • When the Final Rule changes will be announced (most likely early 2016)
  • Effective date for implementation by employers (most likely early-to-mid 2016)

However, based on the information released by the DOL, we do have an idea of what is likely to change and, as employers, we can begin to prepare for the new rules.

Key provisions of the proposed changes

The proposed key provisions are lengthy and have many variables for employers to consider. Below is a high level overview of the proposed key provision changes.

  • Increase the current annual salary threshold for overtime exemption from $23,660 ($455 per week) to $50,440 ($970 per week)
  • Increase the salary requirement for Highly Compensated Employees (HCEs) from $100,000 annually to $122,148 annually
  • Set automatic annual increases to the salary and compensation levels for employees

Although there has been limited discussion of changes to the duties test within the FLSA, the proposed changes listed above will most certainly require employers to review the employee duties to accurately classify and compensate employees.

To-do list for employers to prepare for changes

Since the new rules will most likely be very similar to the proposed rules, employers may want to begin analyzing the positions within their organizations. We recommend employers begin their analysis based on the proposed rule changes. Below is a partial “to-do’ list for employers to start their process:

  • Review all position classifications
    • exempt versus non-exempt status
  • Review all position wage rates
    • identify the exempt positions under the proposed annual salary of $50,440
  • Review the job descriptions for all employees
    • update or create job descriptions, as necessary
    • modify job duties as necessary to comply with the current exempt/non-exempt duties test
  • Discuss and determine the positions that may need to be reclassified from exempt to non-exempt
  • Discuss and determine the possible impact on employee benefits for positions reclassified from exempt to non-exempt
  • Determine the number of positions that may need to have a salary adjustment up to the proposed annual minimum of $50,440
  • Determine the possible financial consequences (budget impacts) for the organization
  • Draft a communication piece to inform the employees of the potential re-classification and/or wage changes
  • Determine the best way to train managers and other decision makers on the new rules

the Strategic Solution can help you

Our Human Resources professional, Mary Hjorth, SPHR, SHRM-SCP can assist your company through this change with an overall analysis including job descriptions, communications, and training. If you are interested in speaking with Mary, she can be reached at mhjorth@thestrategicsolution.com or at 512-656-5952.