July 7, 2015
[INDIANAPOLIS, IN] (July 2015)—Employers are seeking ways to understand the proposed changes to the overtime regulations under the Fair Labor Standards Act (FLSA) that the Department of Labor (DOL) announced this week. The revisions could impact millions when the final ruling possibly becomes effective next year.
The bottom line for employers is that any employee currently making less than $24.25 per hour, $970 per week, or $50,440 annually that are currently ineligible for overtime pay may now be eligible for overtime pay beginning in 2016. There are a number of industries that will feel the immediate impact to their business due to this proposed change. Employers will need to identify any employees currently exempt from overtime pay that make less than the new salary requirements, as these employees will now be eligible for overtime pay. Many employers will be faced with the possibility of reducing hours worked to 40 or less per workweek, in order to avoid overtime pay. Management will need to be diligent in watching hours worked for those employees who do not meet the new salary requirements, or will be legally obligated to pay overtime pay at a rate of 1-1/2 times their normal rate of pay for all hours worked over 40.
FLSA History
The Fair Labor Standards Act was passed in 1938 and covers such things as minimum wage, overtime, child labor provisions, and recordkeeping. The minimum salary to meet overtime pay exemption is currently $11.37 per hour, $455 per week, or $23,660 per year. Some states have minimum wage laws that exceed $11.37 per hour. Should the DOL proposed increase go into effect, it would mean $12.87 more per hour, $515 more per week, or $26,780 more per year, or more than double the current minimum.
What Now
Currently, the law enables four job classification exemptions in regards to overtime pay. The exemptions are based on job responsibilities (the primary job duties the employee actually performs). However, in order for an employee to be exempt from receiving overtime pay, they must meet both the job duties test and the minimum salary requirement. If they fail either test, they will not qualify for exemption. This means many employers will now have employees who will have to be reclassified as non-exempt, even if their responsibilities would qualify because they do not make more than $50,440 a year.
Although these are only proposed rules, employers will now want to evaluate their current workforce and how these anticipated changes would affect them. Total Reward Solutions can help you evaluate all of your options relative to these proposed changes and make recommendations on what option is best for your organization, along with an effective roll out and communication plan. Call us today at 317-589-8529 to discuss how we can help you work through the new proposed regulations and its impact on your organization.
Total Reward Solutions is a consulting firm focused on helping clients implement solutions in the areas of compensation and benefits, performance management and reward/recognition programs. For more information about Total Reward Solutions, go to www.totalrsolutions.com.