In response to the final overtime rule, which increases the minimum salary level to qualify for the white collar exemptions under the Fair Labor Standards Act (“FLSA”), employers must begin to evaluate and alter their current employee classifications and pay structures in preparation for the rule’s December 1st effective date. For many employers, it may not be possible to raise every exempt employee’s salary level to the new minimum of $47,476.00, over double the current threshold level of $23,660.00. If employers cannot raise salary levels, exempt employees will have to be reclassified as non-exempt employees entitled to overtime pay. This can be a very challenging situation for employers because many exempt employees are expected, and regularly do, work a certain amount of overtime each week to complete the required responsibilities of their positions. Furthermore, exempt employees are used to being paid on a salary basis with some level of certainty in their take home pay.
To address these issues and create some predictability for both the employer and the employee, one option is to implement a compensation structure that pays certain non-exempt employees an annual salary factoring in a certain amount of overtime. The FLSA permits non-exempt employees to be paid on a salary basis as long as Continue reading →
The day that has been looming over employers for the past 2 years since President Obama directed the U.S. Department of Labor (“DOL”) to update and modernize the existing Fair Labor Standards Act’s (“FLSA”) white collar exemptions has finally arrived. Today, the DOL released its final rule revising the regulations governing who is exempt from overtime, along with guidance on its major provisions. The final rule, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, largely reflects what the DOL had proposed in 2015, with some important revisions, including a slightly lower salary threshold level at $47,476.00. However, that salary floor still sits at more than double the current salary threshold of $23,660.00.
There is no doubt that the final rule will dramatically increase the number of workers who will now qualify for overtime pay, forcing every employer in the country to carefully assess how to handle the additional financial burden. Indeed, the DOL projects that the rule will extend overtime eligibility to 4.2 million workers.
As we transition into 2016, it is essential that employers are aware of and plan for changes to employee wage requirements and the increased emphasis on wage and hour compliance. For at least the past decade, the number of wage and hour claims filed in federal courts has increased exponentially and 2016 looks like it will be much of the same with fuel for a significant rise. In Fiscal Year (FY) 2000, employees filed only 1,935 claims for violations of the Fair Labor Standards Act. At the end of FY 2014, that number had increased by more than 420% to 8,160 wage and hour lawsuits filed in federal court. In FY 2015, the trend continued with 8,781 wage and hour cases based on data released by a national law firm from the Federal Judicial Center. This represents a 7.6% rise in these types of suits from 2014. With employees filing wage and hour claims on a much more frequent basis, compliance is of even greater importance and 2016 looks to present some additional challenges on that front.
An Increasing Minimum Wage
Last year, many employers saw an increase in the required minimum wage at the state level, as well as a rise at the federal level for federal contractors. For many states and federal contractors, 2016 will bring another round of higher minimum wages. Continue reading →