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New FLSA rule could impact overtime for exempt employees

By Brianna Liestman

If you have salaried employees who regularly work overtime, a new rule coming will affect your business directly.

The Labor Department is moving to release its final rule to change the salary-base threshold amounts for exempting workers from overtime pay. After the final Fair Labor Standards Act coverage rule is published, employers will have 60 days to comply.

The Office of Management and Budget, the last administrative step in the rulemaking process before publication and implementation, are reviewing the final text of the new rule. The rule implementation date is unclear as of right now, but the recent activity in government agencies suggests it may be on its way to publication.

The White House Office of Information and Regulatory Affairs (ORIA) has had 14 meetings with groups since it received the final rule on March 14. The participants have included the National Federation of Independent Business, the U.S. Chamber of Commerce and the Coalition of Franchisee Associations.

The FLSA contains exemptions from minimum wage and overtime requirements for employees classified by the employers as executive, administrative, professional and computer employees. Many business owners refer to these positions as “exempt” because they are exempt under FLSA.

The rule would modernize the white-collar overtime exemption under the FLSA to extend overtime protection to most salaried workers earning less than $50,440 a year, or $970 a week, in 2016. Under existing regulations, the standard salary required for an executive, administrative or professional employee to qualify for exemption from FLSA overtime requirements is $23,600 a year, or $455 a week.

This rule would also increase the total annual amount that highly compensated employees must earn to qualify for the exemption from $100,000 to $122,148. It would also establish a way to automatically update the salary and compensation levels.

Employers can effectively prepare by identifying employees who need to be reclassified as non-exempt, which is anyone paid less than $60,000 a year. You can develop a new compensation plan for the reclassified employees, review wage-hour policies and processes, communicate the changes and train reclassified employees and managers. If you have the ability to increase any affected employee’s salaries to the $50,440 threshold, you can do this as well.

To avoid costly mistakes, employers may want to hire or involve an employment attorney or experienced human resources professional. The FLSA requires that the position meet specific criteria in order to qualify for a particular exemption, and the analysis of the FLSA’s duties as it relates to a position may be difficult to navigate.

Before the proposed rule takes effect, a review period will be announced, and the final rule will be published in the Federal Register, which may be found at www.federalregister.gov.

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