FLSA Overtime Changes: The Big Announcement

by Mammoth Team on May 18, 2016

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This is the final part of a 3 part series on the sweeping FLSA Overtime Changes announced this year. In this article, we examine the actual rule changes that were released and what you should do to implement them effectively. Part 2 highlighted some specific company policies you should consider updating in order to comply with any new overtime rules. Part 1 focused on what employers can do to prepare for the changes.

New overtime changes affecting millions of U.S. workers are one step closer to becoming a reality. The Department of Labor today released its final rule doubling the salary level used to determine whether employees are classified as exempt from overtime under the Fair Labor Standards Act.

Here are 5 key things employers should know about the new rules:

  1. The new annual minimum salary threshold will increase to $47,476, from the current level of $23,660. That’s equivalent to $913 a week, up from $455.

  2. The federal government estimates the new rules will grant overtime rights to roughly 4.2 million American workers who are currently excluded.

  3. The new rules call for automatic increases to the exempt salary threshold every three years.

  4. The effective date of the new rules is December 1, meaning that’s the date by when employers need to comply with the overtime changes.

  5. The new rules do not affect the “duties tests,” that must be passed to qualify for exemption.

So, what should employers do now to get a head start on implementing the changes? Here are a few areas to focus on.

 

Calculate the costs of reclassification vs salary increases

In Part 1 of this series, we give some in-depth examples of how to determine the hourly rate of your employees who may be affected by the rule changes. In short, you’ll want to consider whether it makes sense for your organization to raise the salaries of your employees who may be below the new exempt level of $47,476 in order to maintain their exempt status, or whether to reclassify them as non-exempt, which would qualify them for overtime.

There are a lot of important decisions to consider around this, so plan to take some time evaluating your current employees’ salaries. Don’t be tempted to simply calculate each employee’s hourly rate assuming they work 40 hours a week. You may be surprised.

 

Communicate your decisions to affected employees and managers.

If you decide that some employees will need to be reclassified from exempt to non-exempt, be sure to clearly communicate the reasons for the change to those affected.

For better or worse, being exempt (or salaried) has been a status symbol in the American workplace. It’s important to communicate that this change isn’t due to the employee’s performance, dedication to the company, or contribution – it’s simply a result of changes to federal law that the company must comply with.

You’ll also want to consider how you communicate the changes: one-on-one meetings, small group settings, companywide announcements, or a combination of all three.

 

Conduct proper training of managers and employees

If some employees will be reclassified to non-exempt, that means they’ll now need to start tracking their hours. That will be a big change for both the affected employees and their managers. Be sure to train them on how to properly track their hours and on your processes for requesting and approving overtime.


Free Webinar

The new FLSA overtime rules may mean a lot of change for your organization. Watch our free, educational webinar to learn:

  • How to effectively implement the new overtime changes
  • What policies you should update in order to comply with the new rules
  • Tips on communicating the changes to affected employees

FLSA Overtime Changes: What Employers Need to Know

Watch Now

 

Topics: Compliance, Best Practices, Wage & Hour

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