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Updates to the Fair Labor Standards Act

06/28/2016

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Staying Compliant

Since 2004, we have not seen any updates to the Fair Labor Standards Act (FLSA), but as of May 23, 2016, a finalized version of new details to the rule became available. Perhaps the most important news is that the U.S. Office of Management and Budget (OMB) listened to employers’ concerns about the complexity of compliance. The Final Rule becomes effective on December 1, 2016. What follows are the 5 key provisions to the updated FLSA.

  1. Employees earning less than $47,476 annually ($913 weekly) must be classified as non-exempt employees. 
  2. Employees under a $47,476 annual salary threshold are now eligible for overtime pay for any hours worked over 40 hours in a work week. 
  3. The $47,476 annual salary threshold will be increased by the Department of Labor (DOL) every three years.
  4. Employers will now be able to count non-discretionary bonuses, incentive payments, and commissions toward as much as 10% of the salary threshold. In order to count, these payments must be paid on a quarterly or more frequent basis. The new rules also permit the employer to make a catch-up payment.
  5. Automatic updates to the salary thresholds will occur every three years, beginning January 1, 2020. 

There are also some updates on the classification of exempt vs. non-exempt employees. Currently, to classify as an exempt employee, you must be paid on a salary basis, not paid less that $455 per week ($23,660 annually), and you must meet DOL Job Duties Test. However, when the updates to the FLSA become effective on December 1, 2016, to be an exempt employee, you must not be paid less than $913 per week ($47,476 annually), and the salary threshold for highly compensated employees (HCE) will increase to $2,577 per week ($134,004 annually). The DOL Job Duties Test will still be required for exempt vs. non-exempt employees. If you need to be refreshed on the difference between exempt vs. non-exempt employees, check out our blog here.

LBMC Employment Partners can help you with any aspect of these updates, running an internal audit, identifying other possible issues (like the effects of the updates on budgets and time keeping), and developing a plan to help make this transition as seamless as possible. Contact your local LBMC Employment Partners representative today to see how we can assist you.

Posted in: Human Resources