New FLSA Regulations…Is your Company Prepared?

The Department of Labor (DOL) has recently proposed changes to the Fair Labor Standards Act’s (FLSA) overtime regulations. These proposed changes include increasing the salary level test for Executive, Administrative and Professional level exemptions, as well as increasing the salary level for Highly Compensated Employees. The proposed changes also include reanalyzing the definition of “primary duty” for the purposes of proper FLSA classifications.

These proposed changes will dramatically reduce the number of employees who qualify for the overtime exemptions under the FLSA.

These proposed changes include increasing the minimum salary level an employee must earn on a weekly basis in order to be considered “exempt” from overtime regulations. The minimum salary level test is the first step when classifying an employee as “exempt” from overtime. Currently under FLSA regulations, an employee meets the minimum salary level test if he/she earns at least $455 per week. The DOL’s proposed regulations include increasing the minimum salary level to $970 per week. The second step involves satisfying the “primary duty” test.

The DOL estimates roughly 4.6 million employees will lose their exempt status based on these new regulations. Employers do not need to start reclassifying employees just yet. However, employers should start establishing a timeline, analyzing their current “exempt” positions and making plans to implement a change once the final rule is published by the DOL. These new proposed regulations are anticipated to take effect in the latter part of 2016.

How should your company prepare?

To prepare, employers should start by reviewing the positions held by exempt employees who are paid less than the proposed threshold of $970 per week. Once a proper analysis of these positions has been conducted, an employer has several options to remedy the situation and ensure compliance with the new proposed changes. Below are a few of the options available to employers if they are currently paying employees less than the proposed threshold:

  • pay the same salary, but also pay overtime; or
  • pay the employee an hourly wage plus overtime; or
  • reduce the employee’s salary to account for anticipated overtime; or
  • utilize an alternate compensation plan which includes payment of overtime.

Employers do not need to be concerned with employees at or above the proposed threshold at this time. However, employers do need to be aware of the potential risks and consequences surrounding the proposed DOL overtime regulations. Creative Business Solutions (CBS) can assist you with determining the best course of action for your organization. CBS can also assist with the evaluation and determination of appropriate FLSA classifications for the various positions in your organization.

Please call us today so we may ensure your organization is prepared and compliant with the new regulations. Of course, CBS will be pleased to assist your organization with any HR compliance issue you may – or could be – experiencing.

Paulus, Katherine. "FLSA New Rules Coming Your Way." Kansas SHRM Employment Law and Employee Benefits Conference. Topeka. 15 Feb. 2016. Speech.

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