On May 18, 2016 the U.S. Department of Labor announced a final rule regarding overtime payment qualifications under the Fair Labor and Standards Act (the “FLSA”). The rule is to be effective as of December 1, 2016 and it raises the required salary amount that an employee must be paid if that employee is to qualify for the exemption from overtime pay.
Prior to the final rule, an employee could be classified as exempt from the FLSA overtime pay requirement if the employee meet three tests, a salary basis test, a salary level test and a duties test. The final rule does not affect the salary basis or duties test, but it increases the amount an employee must be paid to meet the salary level test from $23,660.00 per year (or $455 per week) to $47,476.00 per year (or $913) per week. An increase of more than double the pre-final rule amount!
What does this mean for employers? Employers should make sure they get the proper advice to assure they understand the full implications of the final rule and how it will affect their company. Employers will need to re-evaluate the classification of their exempt and non-exempt employees and identify those employees who will be affected prior to the December 1, 2016 deadline. Employers should also communicate any work schedule or salary changes to employees who will be affected before the December 1 deadline and implement any new timekeeping practices and any manager/supervisor training necessary.
Employee classification is a huge burden for employers. Employers are liable to know which employees are W-2 employees, which are 1099 employees, which W-2 employees can be exempt from overtime pay and which are non-exempt, and if commission based payed employees qualifies for minimum wage exemption or not.
The improper classification of any of these categories can lead to employee suits, business penalties, civil fines, criminal fines and imprisonment. The consequences are real and it is that reality that makes the recent final rule under the FLSA all the more daunting.
But there is a simple solution – a good human resource infrastructure. By Investing in human resource compliance processes, Employers saves time and money and it results in the type of consistency that leads to satisfied employees.
At Jackson Corporate Law Offices, P.C. we strive to add as much value to our legal services as possible. Retaining our firm can save business owners thousands of dollars in human resource salaries. In Illinois a human resource manager makes between $60,000.00-$100,000.00 per year. An annual employment retainer with Jackson Corporate Law Offices ranges from $12,000.00 to $32,000.00. In addition, by retaining a law firm to handle employment infrastructure an employer can be sure that their policies and procedures are in compliance with the most current and applicable law.