Fair Labor Standards Act and your Exempt Employees

Background

On July 1, 2015, the Department of Labor released proposed changes to the Fair Labor Standards Act (FLSA) — specifically regarding the “white collar” exemption from minimum wage and overtime pay. The public had until September 4, 2015 to comment on these proposed changes. Read the press release from the Department of Labor.

White Collar Exemption

Currently, FLSA provides an exemption from minimum wage and overtime requirements for any employee employed in a bona fide executive, administrative, or professional capacity. To qualify for exemption, employees must meet certain standards regarding their job duties and be paid on a salary basis at no less than $455 per week (the equivalent of $23,660 a year).

Proposed Changes

The proposed rule change would:

  • Raise the salary threshold from $455 a week to about $970 a week ($50,440 a year) when finalized in 2016.  This is the 40th percentile of weekly earnings for full-time salaried workers.
  • Increase the total annual compensation requirement needed to exempt highly compensated employees (HCEs) to the annualized value of the 90th percentile of weekly earnings of full-time salaried workers ($122,148 annually); and
  • Establish a mechanism for automatically updating salary and compensation levels in the future.

What Should I Do?

Track your exempt employee hours.  You need to determine if any of your employees are affected, and be prepared to ensure compliance.

When Should I Do It?

Begin immediately tracking the hours and devising a plan.  The proposed changes are anticipated to take effect in 2016.

While there is no guarantee the FLSA changes will take effect exactly as proposed, it is likely the changes to “White Collar” exempt status and overtime will change significantly.  Support Kansas City already implemented a system to track hours for employees affected by these proposed changes.  We recommend you learn as much as you can about the proposed FLSA changes and be ready to move when the dates are set.

 

Click here to view a brochure prepared by Paycor to help you master proposed Department of Labor overtime updates.


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