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Tag Archives: FLSA

Federal Overtime Pay Expansion Detailed As DOL Reveals Final Exemption Threshold Regulations And Effective Dates

Is your company ready for the major overtime pay expansion announced by the United States Department of Labor (DOL)? On May 18th, the DOL revealed the details behind the final exemption threshold regulations. The new regulations will greatly expand the number of employees eligible for overtime pay. In addition, the DOL officially announced that the effective date of the Final Rule is December 1, 2016. The nationwide increase to the standard salary level (from $455 to $913 per week) and highly compensated employee total annual compensation requirement (from $100,000 to $134,004 per year) will be effective on that date. Given the significant changes, Total HR Management is helping our client companies navigate through the new federal overtime requirements.

In 2014, President Obama directed the Department of Labor to update and modernize the regulations governing the exemption of executive, administrative, and professional employees (EAP) from the minimum wage and overtime pay protections of the Fair Labor Standards Act (FLSA). On May 18, 2016, the Department published a Final Rule to update the regulations.

Final EAP Overtime Pay Expansion Rules

overtime pay expansionIs your company ready for the major overtime pay expansion announced by the United States Department of Labor?

New DOL Rules About Employee Overtime Pay Expansion

Since 1940, the Department of Labor’s regulations have generally required each of three tests to be met for the FLSA’s EAP exemption to apply: (1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed; (2) the amount of salary paid must meet a minimum specified amount (“salary level test”); and (3) the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by the regulations.

Without intervening action by their employers, the new regulations extend the right of overtime pay to an estimated 4.2 million workers who are currently exempt. It also strengthens existing overtime protections for 5.7 million additional white collar salaried workers and 3.2 million salaried blue collar workers whose entitlement to overtime pay will no longer rely on the application of the duties test.

Overtime Pay Expansion Details

The most significant change involves the salary basis test for white-collar employees. In order to meet the salary basis test for the EAP exemptions, employees must be paid a minimum of $47,476 per year or $913 per week. The threshold was set based on the 40th percentile of full-time salaried workers in the lowest income Census Region, currently the Southern states. While this increase is lower than the originally proposed $50,440 per year, it still will result in a significant number of previously exempt employees being now eligible for overtime pay.

For the first time, however, employers will be able to use nondiscretionary bonuses and incentive payments, including commissions, to satisfy up to 10 percent of the standard salary level threshold of $47,476. As a result, an employee with a base salary of $42,729 per year may actually be exempt. In order to attain exemption status, the employee must also receive a minimum of $4,747 in non-discretionary bonus, commission or incentive compensation. Moreover, such compensation needs to be distributed on at least a quarterly basis.

Traditional Exemptions Still Apply

Although the $47,476 minimum salary level will affect millions of white-collar employees nationwide, it does not apply to employees who qualify for an exemption that is not tied to a salary requirement. For example, outside sales employees, teachers, attorneys and physicians all fall under these traditional exemption categories for a variety of reasons under the law. The final rule also does not impact the so-called “duties tests” for white-collar exemptions.

The new salary exemption threshold that has led to this major overtime pay expansion will not be fixed. Instead, an automatic mechanism has been instituted so the salary thresholds for exempt employees will increase every three years, beginning January 1, 2020. The goal of this ongoing increase is the DOL’s focused desire to continue to reflect the 40th percentile for salaried workers in the lowest income Census Region. Opening the door to another major overtime pay expansion, the exemption threshold is anticipated to reach $51,000 in 2020.

Changes For Highly Compensated Employees

Finally, the total compensation requirement for “highly compensated employees” has increased from $100,000 to $134,004 annually, equal to the 90th percentile of full-time salaried workers nationally. The threshold level for these employees is based on total annual compensation, not just those amounts paid on a salary basis. These levels also will adjust every three years. Such employees require “only a minimum showing” that they are otherwise exempt under one of the duties tests.

To learn more about how the overtime pay expansion and the exemption threshold regulations will affect your company, contact Total HR Management to set-up an HR audit. Please call (800) 975-5128 today to speak with an HR professional and access the help your company needs.

 

No Legal Advice Intended: This blog includes information about legal issues and legal questions.  Such materials are for informational purposes only and may not reflect the most current legal developments.  These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. You must not rely on the information on this website as an alternative to legal advice from your

Updated FLSA Rules Regarding The New Wage Threshold For Overtime Exemption

Do you know the new FLSA rules concerning employee overtime exemption? Administered by the United States Department of Labor (DOL), the Fair Labor Standards Act (FLSA) governs most jobs in the American workforce. While some jobs are excluded from FLSA coverage by statute, other jobs, while governed by the FLSA, are considered “exempt” from FLSA overtime rules. In this context, exempt means exempt from overtime pay and the traditional definition of the 40 hour work week. In 2015, the DOL issued a proposal to substantially increase the minimum salary level needed to classify an employee as an exempt executive, administrative or professional employee. Ever since the proposal became law, employers have been requesting to know both the details of the new overtime exemption rules and when they will take effect.

New Wage Threshold For Overtime Exemption

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Wage Threshold for Overtime Exemption

In this article, Total HR Management provides a detailed examination of the updated FLSA rules regarding the new wage threshold for overtime exemption. According to the Wall Street Journal, the final rules should come into effect by the end of 2016. These rules include the proposal to raise the salary limit for who is eligible for overtime pay from $23,660 per year to $50,440. Such a change will put millions more employees in the United States in line for overtime pay. By raising the threshold, employers will need to pay employees making less than $50,440 overtime when they work more than 40 hours in a week with practically no exceptions.

Total HR Management wants to emphasize that employers may not have much time to comply once the final rules are issued. When the Department of Labor last made significant changes to the white collar exemption regulations in 2004, the final rules were published on April 23 and took effect only four months later. The schedule for the implementation this time around could be even tighter.

Implementation Of New Wage Threshold

Employers should be prepared to act with as little as 60 or even 30 days’ lead time. With presidential elections in November of 2016, it is a fair bet that the Department of Labor will want any final regulations to take effect before a new president takes office. As a result, if the final rules are issued in “late 2016” as promised, employers may have only a month or two to comply.

In addition, employers need to assume that the minimum salary level will be increased to approximately $970 per week for 2016, with annual increases thereafter. The DOL’s proposed rules increase the minimum weekly salary for exempt employees from $455 per week to a weekly salary at the 40th percentile of weekly earnings for full-time salaried workers. The percentages are based on Bureau of Labor Statistics data. For 2016, the DOL has projected that this number will be $970 per week, which works out to about $50,440 per year.

Although the payroll specialists at Total HR Management consider it to be unlikely that the final implementation will increase the minimum salary level above the 40th percentile, such a last minute change is not an impossibility. This is exactly why your company needs the support of a professional employer organization (PEO). Right now, it is safe to assume that $970 will be the applicable minimum salary. If the totals come in higher or lower, Total HR Management will immediately alert our client companies and help them make any necessary adjustments.

The Job Duties Test Is Important

While the DOL’s proposed rules do not change much in the current regulations other than the minimum salary level, the final rules may contain more surprises. For example, the final rules might contain changes to the job duties tests for executive, administrative and professional employees. Since the DOL asked for comments on some aspects of the current duties tests, when coming up with the latest updates, it presumably would not have done so unless some changes were still in consideration.

When it comes to the updated FLSA rules, the time to start your company’s compliance planning is now. In many cases, this may mean re-classifying employees as non-exempt. While it will offer the promise of additional overtime pay for some, this change may not be popular with all employees. Many exempt employees like being treated as exempt, both because of the status they believe it conveys and because it offers a level of flexibility in their hours that non-exempt employees may not enjoy. As a PEO, Total HR can help your company determine how your workforce is likely to react to these changes. The goal is to make the transition as smooth as possible.

Total HR Management Can Help

A new wage threshold for overtime exemption combined with the job duties test presents a lot of challenges to any company. To learn more about how Total HR Management can support your company’s compliance with the updated FLSA overtime exemption rules, please contact us today. Call (800) 975-5128 to schedule an HR audit and access the payroll support your company needs.

 

No Legal Advice Intended: This blog includes information about legal issues and legal questions.  Such materials are for informational purposes only and may not reflect the most current legal developments.  These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. You must not rely on the information on this website as an alternative to legal advice from your attorney or other professional legal services provider.

How A PEO Can Help Your Company With Employee Safety And Health Compliance

employment safety and health compliance , esh, peo

Employee Safety And Health Compliance (ESH) has evolved into one of the most complex compliance issues for businesses. A professional employer organization (PEO) can help your company ensure that safety awareness does not become a problem. Safety awareness compliance is also directly connected to workers compensation claims. Such compliance is linked to a number of regulatory issues and requirements, including:

  1. Americans with Disabilities Act (ADA)
  2. Fair Labor Standards Act (FLSA)
  3. Affordable Care Act (ACA)
  4. Occupational Safety and Health Administration (OSHA)

As a PEO, Total HR Management understands if the above list is intimidating, particularly in light of all of the posting requirements. Such posting requirements of the above federal acts do not even include the required postings and regulations of individual states. California is particularly challenging in this regard. The HR managers at Total HR Management can help ensure this does not become a problem for your company.

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How A PEO Helps With Worker Classification And Independent Contractor Compliance

Worker Classification, Independent Contractor Compliance

Independent Contractor Compliance

Do you know how a professional employer organization (PEO) can help you your company with the challenge of worker classification and independent contractor compliance with the IRS? In this compliance series, Total HR Management outlines why your company should work with a PEO. The goal of working with a PEO is to relieve the HR administrative pressure. In light of the Affordable Care Act, the proper designation of employees and independent contractor compliance has become more challenging and more important than ever before.

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Eleven Compliance Issues And Workplace Challenges That Show Why Your Company Should Work With A PEO (An Introduction)

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Challenges of 21st Century Workplace

Total HR Management is starting a series of blogs about the 11 compliance issues and workplace challenges that show in detail why your company should work with a PEO. The goal of working with a professional employer organization is to take the human resources and administrative pressure off of your back. Total HR wants you to be able to do what you do best: Work on the productivity and profitability of your business and not in the labyrinthine bureaucracy of your company.

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