Broad Fair Labor Standards Act (FLSA) Changes – How Will They Affect Your Business?

Broad Fair Labor Standards Act (FLSA) Changes – How Will They Affect Your Business?

The Department of Labor (DOL) recently released significant proposed changes to the overtime pay regulations under the Fair Labor Standards Act (FLSA). These proposed FLSA changes impact employers in every industry and sector.

Although the final FLSA regulations are not expected to go into effect until sometime in 2016, anticipated impacts on employers include:

  • Changes to employee exempt/non-exempt classifications resulting from analysis of current classifications in the context of the new final rules.
  • A change to the DOL’s methodology for calculating the minimum salary level, referred to in the regulations as the standard salary level, to be exempt from overtime pay requirements resulting in an anticipated increase in 2016 from $23,660 to $50,440 annually.
  • A change to the DOL’s methodology for calculating the Highly Compensated Employee Exemption amount, resulting in an anticipated increase from $100,000 to $122,148 annually.
  • A proposal to recalculate and automatically raise these two standard salary levels annually.
  • In additions to these changing regulations, we are seeing an increase in DOL audits for wage and hours issues.

Actions to take now:

  • Conduct an analysis of your staff to determine which individuals will be impacted by the new $50,440 floor.
  • Consider the budget impact of increasing pay or paying time and a half overtime hours for staff who are affected. Remember that there has not yet been a decision on whether the new floor will be set to automatically raise annually.  Keep this in mind with your planning as there could be an annual expense associated with meeting the new floor.
  • Evaluate the internal equity for positions which are not directly affected by the changing regulations but who are supervising or working alongside those directly affected. You may need to make adjustments to pay arrangements for these individuals as well.
  • The State of Washington doesn’t recognize the Highly Compensated Employee exemption but if you have employees in other locations, assess the impact for these employees.
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