In 2004, there were significant changes to the parts of the FLSA that addressed overtime exemptions and 12 years later, we’re going to see some more changes…probably as soon as May 2016!
What will these changes look like?
The rule is not final, so we don’t know for sure yet; but it is likely that the changes will:
- raise the salary minimum considerably –from $455 weekly to $970,
- increase the annual compensation requirement for highly compensated employees from $100,000 to about $122,148,
- establish a built-in mechanism for automatically updating the salary, and perhaps
- make minor changes to the duties tests.
How will these changes affect employers in general and us in particular?
Payroll costs will increase. The effect trickles down. In general, many employers will have to re-examine the classification of their employees’ positions. Some employees will have to be reclassified. Many employers will have less cash to operate in the short run (Many supervisors will have their exemption statuses changed to non-exempt [entitling them to costly OT], or getting raises [in order to maintain exemption status]).
Some organizations will be largely unaffected. Others will have to reduce hours, close branches, use reserves, budget differently, find new sources of income, tighten belts, pray, and so on!
What do I tell my employees and how?
There are only a few possible outcomes as far as I can tell. Here is what to say and basically how to say it. (Customize to taste).
A. You aren’t affected.
a. Your status did not change and you make more than the minimum salary. For you, therefore, nothing changes.
b. You are hourly, non-exempt. You make the minimum wage. Nothing changes for you either.
c. You are highly compensated and make well over the new minimum, you are not affected.
B. You will get a raise!
a. You make a salary. You will remain exempt. In order to do that legally, we must give you a raise. Your new salary is ____.
b. You are paid an hourly wage. It needs to be increased to meet new standards. Here’s a raise.
c. You are highly compensated, but make less than $122,148. Here’s a few more thousand so that we’re compliant.
d. Nobody made us do this, but in keeping with the spirit of the law, we want you to have this extra money!
C. You will get OT.
a. You were exempt because your duties passed the exemption duties test and you passed the salary basis test. You no longer pass the salary basis test and we can’t afford to give you a raise right now, so we have to make you non-exempt. Here’s the good news. You are now entitled to OT. Your immediate supervisor has the authority and responsibility to approve overtime in advance. No one gets to work overtime without prior approval.
b. You were always entitled to OT. Nothing changed that.