If you have salaried employees in your practice, a new rule means you may have to give them a raise or pay them hourly (which means they could get overtime pay).
Effective Dec. 1, 2016, the U.S. Department of Labor (DOL) will update the salary level required for the overtime exemption under the Fair Labor Standards Act (FLSA). This means if your employee makes less than $47,476 annually, then you will have to pay them at an hourly rate, as well as overtime pay for all hours worked over 40 in a workweek. The updated rule, however, does not change the Executive, Administrative and Professional (EAP) duties tests to qualify for the exemptions.
For practices that have salaried employees who fall below the $47,476 threshold, you have two options:
- Raise the employee’s salary above the benchmark. As long as the employee meets the EAP duties test, the increased salary will meet the new overtime exemption requirements.
- Pay the employee an hourly salary, as well as overtime pay for all hours worked more than 40 in a workweek.
“The Department expects that the standard salary level set in this Final Rule and automatic updating will work effectively with the duties test to distinguish between overtime-eligible workers and those who may be exempt,” DOL said. “As a result of the change to the salary level, the number of workers for whom employers must apply the duties test to determine exempt status is reduced, thus simplifying the exemption.”
In addition, future updates to the salary threshold will be automatic, occurring every three years beginning Jan. 1, 2020.
Noncompliance really isn’t an option. And private lawyers filing expensive lawsuits driven by employee complaints make complying with this new FLSA rule essential to your practice. Wage-and-hour legal cases are currently the most active types of employment law litigation, and settlement amounts are hitting all-time highs.
Take Aways:
- Starting Dec. 1, all full-time salaried employees must have a salary of $47,476, or you have to pay them an hourly wage and overtime.
- The salary benchmark will update automatically every three years starting Jan. 1, 2020.
- Noncompliance with the updated FLSA rule is not an option in today’s litigious society.