UPDATE: What Employers and Employees Need to Know About FLSA Overtime Changes

Changes to the revised Fair Labor Standards Act (FLSA) have now been finalized, impacting more than 4 million working Americans. The FLSA is the federal law that governs overtime pay, among other labor issues. Although the changes become law in May of 2016, covered employers are not required to implement them until December 1. The changes were made to ensure that employees receive fair compensation and to protect those employees working 50 to 60 hours per week without adequate compensation.

What are the impending FLSA changes and how do they impact employees?

Most employees fall under an exempt or non-exempt status. Prior to the changes, non-exempt employees were those employees that earned $23,660 or less per year. The new standards raise the salary threshold for those employees that earn $47,476 a year or less, nearly $3,000 lower than what was initially proposed and now classifies these employees as non-exempt. Also, the salary threshold will be reconsidered for automatic updates every three years, instead of annually as initially proposed.

The FLSA requires that covered employers provide non-exempt employees overtime pay of time and half or more per hour once the employee has worked 40 hours of work in a workweek. A “workweek” is considered “any fixed and regularly recurring period of 168 hours” in seven consecutive days. Covered employers must provide overtime pay even if the employee did not receive prior approval to work more than 40 hours during a workweek.

What is considered a “covered employer” under the FLSA?

Not all employers are required to implement the new FLSA overtime rules; only those considered a “covered employer” are included. A covered employer is an employer that has at least two employees and is considered an “enterprise.” An enterprise includes:

  1. Businesses or organizations that have an annual dollar volume of sales or receipts of at least $500,000
  2. Hospitals or businesses providing medical services or nursing care for residents regardless if they are private or public
  3. Schools including pre-schools and higher education institutions regardless if the school is private, public, for-profit, or non-profit
  4. State and federal agencies

What should employers do to prepare for the impending FLSA overtime changes?

Human resources professionals, supervisors, and managers employed by covered employers should prepare now for the new FLSA laws to ensure their organizations do not violate federal law. Violation of the law can result in serious liability and subject the employer to litigation or an audit by the Department of Labor.

To prepare for the FLSA overtime changes, you should do the following.

  1. Review your current workforce to determine which employees will be reclassified from exempt to non-exempt status.
  2. Notify employees of impending changes and explain how those changes may  impact their employment and compensation.
  3. Review budgets to determine how additional overtime pay will impact the bottom line.
  4. Determine whether to increase salaries for any newly reclassified employees whose workload or responsibilities traditionally exceed a 40-hour workweek.
  5. Consider hiring temporary or additional staff to assist non-exempt employees with administrative or time-consuming tasks.
  6. Review job descriptions to determine what tasks and responsibilities can be redistributed to other staff.
  7. Train newly classified non-exempt employees on timekeeping procedures and update systems or processes as necessary.

Now is the time to prepare for the possible impact the FLSA overtime changes could have on you and your workforce. There are a few things you can do to make the transition much easier. For example, you can bring on a temporary attorney with employment experience to help guide you through the changes. Contact one of our locations today to discuss how we can help you prepare.

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