Business Responds to FLSA Proposed Changes

The Department of Labor (DOL) closed the comment period a few weeks ago regarding the proposed 2016 changes to the Fair Labor Standards Act (FLSA).

The FLSA applies to most businesses and enforces overtime provisions, child labor laws and governs the exemption tests to determine if a position within an organization is classified as exempt or non-exempt. Non-exempt means the employee who holds that position is entitled to overtime in accordance with state and federal law based on what they earn and what they do.

There are two tests a position must meet; a salary test requiring a minimum salary that must be paid and a duties test to determine position responsibilities. Exemptions categories include highly compensated, executive, administrative, professional, computer employee and outside sales under the FLSA. Note that state law tests, such as California, may differ from the federal tests and need to be considered during the analysis.

Currently, the FLSA has a minimum salary test of $455 per week/$23,660 annually. The proposed regulations increase the minimum salary test to $970 per week/$50,440 annually (estimated index for 2016). The regulations also propose an increase in the minimum salary threshold to meet the highly compensated exemption from $100,000 to $122,148 in annual salary.

We believe changes to the FLSA will happen in 2016. We recommend evaluating your current positions and compensation levels and identify those that fall below the minimum salary requirements. Are salary adjustments feasible to meet the new minimum salary requirements and maintain the exemption? Is managing overtime the preferred approach? Are staff changes, promotions or reductions appropriate or job share arrangements?

The proposed changes will certainly impact budgets, position classifications and how organizations approach future staffing needs.