The US Department of Labor has announced the highly anticipated changes to the Fair Labor Standards Act (FLSA) overtime regulations. These final regulations substantially change the compensation threshold for “white collar” exemptions from the requirement to pay overtime to employees.
The final rules include the following key provisions:
- They extend overtime protections to 4.2 million workers who are not currently eligible under federal law.
- Workers who earn as much as $47,476 a year ($913 a week) will have to be paid overtime, even if they are classified as a manager or professional.
- While the threshold previously had only been raised once since 1975, the Department of Labor now intends to increase the salary threshold every three years. Based on current projections, the salary threshold is expected to rise to more than $51,000 with its first adjustment on January 1, 2020.
- Employers must comply with the new regulations by December 1, 2016.
All total, these final regulations are expected to have a significant impact on employers across the United States, with particularly large burdens to be faced within certain industry segments as well as by small businesses and nonprofit organizations. Among the actions that need to be taken include the following:
- Employers must analyze their compensation programs as well as their employee classifications in order to make the adjustments necessary to comply.
- When reclassifying historically exempt employees as non-exempt, employers must identify the mechanism and related process they will use to accurately track time for these employees.
- When applicable, employers must consider the downstream financial implications of these changes have upon salary-based benefits offered to employees.
- This change can also affect Life and Disability insurance policies as well as Workmen’s Compensation insurance classifications and rates.
Contact us to speak with an advisor who specializes in providing expert analysis and strategic planning support for matters relating to FLSA, compensation, regulatory compliance and employee communication materials to help employers with this transition.