Much like the long waited appearance of White Walkers in Winterfell, employers nationwide may fear the impending modifications to the Fair Labor Standard Act overtime regulations set to take place in less than two (2) months. The Fair Labor Standard Act ("FLSA") is the federal law that establishes minimum wage and overtime pay requirements for employers. On March 13, 2014, President Obama directed the Secretary of the U.S. Department of Labor to propose new FSLA regulations which are aimed at rules for exemptions of certain employees from the FLSA overtime requirements. So, what does this mean for employers and employees alike?
For many employers, the FSLA changes mean that the overall cost of doing business will increase while the number of employees who qualify for exempt status will decrease. Come December 1, 2016, employers will be required under federal law to implement a system of pay for their employees at the federal minimum wage and overtime rate of at least one and one-half times the employee's regular rate for certain employees who works over 40 hours in a week. Employers will soon need to evaluate their staffing levels to limit overtime.
For employees, this may mean more stringent recordkeeping requirements for tracking their work hours, possible salary increases to bring them in line with the new federal standards, and limiting work to no more than 40 hours per week. Specifically, the FSLA rule changes mean that an employee earning less than $913/week (or $47,476/year) will be entitled to mandatory overtime of at least time and a half for any time he or she works over 40 hours per week. Employers may factor into the salary threshold monetary incentives and non-discretionary bonuses (as well as commissions) to satisfy up to ten percent of the employee's salary.
However, there are several exemptions from the overtime requirement for employees who meet certain criteria. To qualify as an exempt employee, you must: (1) be a salaried employee who is paid on a preset amount regardless of the quality or quantity of work performed; (2) must meet the minimum salary threshold level as stated above; and (3) must be engaged in work involving exempt executive, administrative, or professional employees.
The Department Of Labor estimates that in the first year more than 4 million American workers would either need to be reclassified as non-exempt employees and who are paid overtime when they work more than 40 hours a week, or receive a salary increase to meet the new threshold of $913 per week. Some states, most notably in the South where salaries tend to be lowest, may reassess their minimum wages as well. The rule changes are heralded as a benefit for employees, and a veritable human resources headache for employers.
Regardless of the content of new regulations, winter is coming. Now is the time for employers to reevaluate their payment structures to help manage costs and compliance, and also for employees to take notice of the new standards in wage and overtime afforded to them.