8 Things to Know About the Proposed Changes to the Overtime Regulations

The following article was published by CommonGood Vermont, April 11, 2016.

Thank you to Society for Human Resource Management for this overview and response to the FLSA. As a really broad foundation, the FLSA (Fair Labor Standards Act) provides guidance on which roles can be considered exempt from overtime laws (aka exempt or salaried) and which are non-exempt (hourly). This is determined by a set of “duties tests” and a minimum salary component. The current salary component of the law is set at a minimum of $455/week. We’ve been hearing rumblings for some time that that minimum, which has not been considered in AGES, was going to be raised. We’ve now heard from the FLSA that a new ruling will come on or around July 1 and will go into effect probably 60 days later. Most folks are guessing the new salary test will be in the $45-50k/year range but we won’t know for sure until the ruling is issued.

The Department of Labor’s (DOL’s) proposed changes to the overtime regulations under the Fair Labor Standards Act (FLSA) are closer to an official release, as they are now with the Office of Management and Budget (OMB) for final review. After the review period – which could be a few weeks or a couple of months – the final rule will be published in the Federal Register and will likely take effect 60 days after publication.

SHRM submitted comments to the DOL last year and provided opportunities for SHRM members to discuss how these changes will impact their organizations before the DOL, the Small Business Administration and multiple congressional committees. Additionally, SHRM has recently supported the introduction of bills designed to stop these changes from going into effect until Congress does more research on the adverse effects of the change on nonprofit organizations and small businesses.

In the meantime, we wanted to share this list of 8 important things to know so that you can prepare for what lies ahead.

1. The Impact Will be Significant. Employees and employers across every industry and sector will be impacted. Most employers covered by the FLSA will need to analyze employee classifications and make changes by a likely 2016 effective date that will be established in the final rule. According to the DOL, 11 million employees will be impacted.

2. The Salary Level Will Increase. To qualify as exempt from the FLSA currently, workers must make more than $455/week or $23,660/year. The proposed rule would increase the salary level to the 40th percentile of weekly earnings for full-time salaried workers, projected to be $970/week or $50,440/year in 2016. This will impact all sectors, but it will disproportionately affect the nonprofit and service-sector industries as well as certain geographic areas of the country.

3. For the First Time, the DOL Proposes to Automatically Raise the Salary Level. The department is proposing to automatically update the salary level (including for highly compensated employees) on an annual basis, either based on percentiles of earnings for full-time salaried workers or based on changes in inflation.

4. This Will Include Changes to Highly Compensated Employees (HCEs). The department is proposing to set the HCE annual compensation level equal to the 90th percentile of earnings for full-time salaried workers ($122,148/year in 2016), or based on changes in inflation. Currently, in order to qualify for this exemption, an employee must earn at least $100,000/year.

5. Feedback Is Sought on the Duties Test and Nondiscretionary Bonuses. While no changes have been proposed yet, the regulation acknowledges challenges associated with the duties test and seeks additional examples regarding specific occupations. Similarly, the department wants to hear from employers about the possibility of including nondiscretionary bonuses to satisfy a portion of the standard salary requirement.

For the full article please visit:  http://blog.commongoodvt.org/2016/04/8-things-to-know-about-the-proposed-changes-to-the-overtime-regulations

Davis & Hodgdon Associates CPAs is a full-service public accounting firm with offices in Williston and Rutland Vermont. The firm is a member of Vermont Businesses for Social Responsibility (VBSR), Vermont Business Environmental Partnership (VBEP), Lake Champlain Regional Chamber of Commerce (LCRCC), Vermont Chamber of Commerce, and Women Business Owners Network (WBON).  The firm serves its clients by providing progressive, proactive services through expert staff, sophisticated technology, and unparalleled efficiency. For more information please call 802.878.1963 (Williston) or 802.775.7132 (Rutland) or email [email protected]

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