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FLSA Changes and Your Business

November 29, 2016. Please note that a preliminary injunction has been issued. FLSA changes are currently on hold until this can be resolved. We will keep you updated.

If you are an employer, you need to know the new overtime rules. Beginning December 1, 2016, employers must be in compliance with new overtime rules enacted under the federal Fair Labor Standards Act (FLSA). This is a federal change and yes, lawsuits are expected.

What is the FLSA?

The FLSA contains overtime rules to protect salaried employees from being required to work in excess of an established workweek without being compensated for their time. While hourly workers have long had this overtime protection, most salaried workers have not. They were considered ‘exempt’ from overtime rules. The criteria to determine if an employee is exempt from overtime is called the duties and salary test. Generally speaking, “exempt” employees are those who were primarily engaged in executive, administrative, or professional duties and who received an annual salary of at least $23,660.

What Does FLSA Mean for my Business?

Under the new rules effective December 1, 2016, the exempt group is smaller. There is still a duties and salary test, but the salary threshold has been raised from $23,660 to $47,476. That means employers must pay overtime to employees who were previously exempt under the salary threshold, even if they may otherwise meet the duties test.

What Can My Business Do?

Many employers are looking at restructuring their existing scales of compensation to account for this change to overtime pay. Employers may wish to minimize the number of employees entitled to overtime pay. The updated FLSA allows employers to do so in a variety of ways, but certain strategies are clearly not allowed.

An employer is allowed to include incentives, commissions, and non-discretionary bonuses to an employee’s compensation up to 10% in determining if the employee’s salary meets the new threshold amount. However, an employer may not manipulate an employee’s hourly base rate in order to compensate for overtime pay due.

Keep in mind that this is a general article on the FLSA, and there are many nuances. If you have in depth questions on how the FLSA will affect your business, please contact us.

Law 4 Small Business, P.C. (L4SB), a little law now can save a lot later.

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