The Department of Labor (DOL) has issued the long awaited final FLSA rules on the white collar exemptions from overtime. After hearing many comments from employers, professional associations such as the Society for Human Resources Management (SHRM), and others regarding the impact of the proposed rules on businesses, the final rules provide some relief as follows:
- Minimum Salary Threshold: The final rules lower the minimum salary threshold from the proposed $970/week ($50,440/year) to $913/week ($47,476/year). Although the threshold is lower in the final rules, the new threshold is nevertheless a significant increase over the current threshold of $455/week ($23,660/year).
- Automatic Salary Threshold Increases: Under the proposed rules, the minimum salary threshold would have increased annually. Under the final rules, the threshold will increase every three years. The automatic increases to the thresholds will start on January 1, 2020. The threshold will be set at a level equal to the 40th percentile of full-time salaried workers in the lowest-wage census region.
- Effective Date: The final rules are effective December 1, 2016. Typically, the standard implementation timeframe is 60 days so the December effective date is good news in that it gives businesses more time to prepare for changes that may be required.
In addition, under the final rules, the highly compensated employee (HCE) exemption level is now $134,004 per year. This level is higher than expected. The HCE exemption level will be set at the 90th percentile of full-time salaried workers nationally. Are you ready for the FLSA changes?
Have you determined how the changes may impact your business? To prepare for the changes:
- Identify which of your current salaried employees will not meet the new minimum salary threshold.
- Determine whether you will increase salaries to the new minimum salary threshold or not increase them and reclassify the individuals and pay overtime.
- And, very important – you’ll need to think through your strategy for talking with employees impacted by the changes. For example, if you decide to reclassify employees to nonexempt, the employees must report their time like any other hourly paid employee. This may be perceived by some employees as not being treated as a professional. On the other hand, if you decide to increase employees’ salary to satisfy the minimum salary threshold, it will be important to explain the increase to the employee.
If you need assistance with determining financial impact, alternatives to consider, and your employee communication strategy, please contact Pamela Sande at 774-205-4018.
To view the final FLSA rules, see our Resources page.