New FSLA Guidance

NEW FSLA GUIDANCE – EFFECTIVE DECEMBER 1, 2016

Effective Dec. 1, 2016, the new Department of Labor regulations will require employers to meet greater salary thresholds regarding overtime exemptions. Due to these regulation changes, scrutiny of employers’ existing pay and classification practices has increased.

* Key Provisions of the Final Rule *

“The Final Rule focuses primarily on updating the salary and compensation levels needed for workers to be exempt. Specifically, the Final Rule:

  • Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South, which is $913 per week or $47,476 annually for a full-year worker;
  • Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally, which is $134,004; and
  • Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.

Additionally, the Final Rule amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level. The Final Rule makes no changes to the duties tests.”(per www.dol.gov website).

To qualify for exemption under the duties tests, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week. Job titles do not determine exempt status! In order for an exemption to apply, an employee’s specific job duties and salary must meet all the requirements of the Department’s regulations.

It only takes one employee filing a claim with the Department of Labor to trigger an investigation. Also, the DOL can initiate an audit at any time independently of an employee complaint. 2015 stats show 42% of investigations were agency initiated. Industries particularly vulnerable to compliance issues are restaurants and retailers.

First step in reviewing compliance is to reevaluate your employee manual and job descriptions:

Can you provide proof of exemption for every employee classified as exempt?

Are you positive all independent contractors are classified correctly?

Could you accurately report three years' worth of employee wages with confidence that everyone was paid correctly?

If you cannot answer "yes" to these questions, the potential consequences are severe.

Being in violation of the FLSA can cost an employer fine and penalties. Now is the time to review your employee manual and job descriptions and make changes, as necessary!

Effective date is December 1, 2016.

If you require additional information, please contact this office.

U.S. Department of Labor Fact Sheet