“A fair day’s pay for a fair day’s work.”- That’s the goal behind President Obama’s memorandum, which directed the Department of Labor (DOL) to update the current Fair Labor Standards Act (FLSA) minimum wage and overtime standards back in March 2014.
Many Business owners have held a steady breath since the 2014 announcement, and the first proposed revisions experienced a substantial share of scrutiny from business owners and a largely republican congress. But a second, conclusive review has been conducted and agreed upon; and this time it’s final. On May 18th 2016, the DOL released a fact sheet with the final revisions of the proposed rules, which includes salary thresholds for certain employees that qualify as exempt from the minimum wage and overtime provisions of the Fair Labor Standards Act (FLSA).
Whether you’re for or against the provisions, the implementation of the new rules will have a significant impact on the American workforce, and the date of mandatory compliance has been set for December 1st 2016. Below is an outline of things you need to know about the rule change.
8 Things You Need To Know About the DOL’s Final FLSA Ruling
- Reclassification of Employees. A significant amount of employees will need to be reviewed and possibly reclassified from exempt to non-exempt status.
- $458/wk Increase in minimum salary requirement for exempt employees. The minimum salary level for an employee to be classified as exempt will be $913 per week or $47,476 annually (up from the original $455 per week or $23,660 annually).
- $34,000/yr Increase in salary requirement for Highly Compensated employees. The threshold for an employee to be classified as Highly Compensated will rise to $134,004 annually (up from the original $100,000 annually).
- There are no changes to the duties test. The duties test that must be met by an employee to be classified as exempt will remain as-is since the original Fact Sheet 17A was revised back in July 2008.
- Non-discretionary bonus/incentives can be used to meet requirements. Employers are allowed to pay up to 10% of the $913/weekly salary requirement in the form of a non-discretionary bonus or other incentive compensation such as commissions, as long as the payments are made at least quarterly; this lowers the minimum salary requirement to $821.17 per week. (Any amount remaining unpaid from the 10% can be paid in the first pay period of the next quarter, alleviating last minute adjustments to payroll within a quarter).
- Automated Raises in Salary Levels. The salary levels will update every 3 years as opposed to the original law that did not require any updates.
- Demographic Impact. An estimated 4.2 Million workers will be impacted by the new minimum salary requirements and an estimated 65,000 workers will be impacted by the new Highly Compensated salary requirements.
- Projected Levels for 2020. The DOL has released the estimated minimum levels for 2020 in an effort to exhibit the evolution of the automated raises. The estimate shows the increases to be $984/wk (or $51,168 annually) for salaried employees and $147,524/annually for highly compensated employees.
These rules may come as a shock to those who haven’t been keeping up with the prior revisions, but the increases and changes are not as costly as originally proposed back in April 2016. The original proposal would have raised the salary requirement for exempt employees to $50,000 and would have revised the thresholds annually; the final regulation revises them every three years.
At this point, many businesses are asking themselves how they can make a smooth transition to the new rules by the deadline of December 1st 2016; the good news is that Valiant is here to help. Give us a call or send us an e-mail with any questions or concerns you may have. We’ll be monitoring the progress of this revisions and vow to keep you informed on the latest news and any changes that may take place.