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Attorney Answers to Your Questions About the New FLSA Overtime Rules

3/24/2016
Attorney Answers to Your Questions About the New FLSA Overtime Rules Here are legal answers to questions about the new FLSA overtime rules.

The expert legal team from Poster Guard® Compliance Protection hosted a webinar, “DOL Announces New Overtime Rules: What You Need to Know (and Do) to Comply” on May 31, 2016. The one-hour presentation addressed the long-awaited FLSA changes that increase the salary threshold for employees classified as “exempt,“ or eligible to be paid a salary without overtime. Because the Department of Labor (DOL) estimates that nearly 5 million workers could become eligible for overtime under the latest regulations, employers need to be aware and ready to act. Since the first airing of the webinar, Ashley Kaplan, Esq., has handled numerous questions from participants.

If you haven’t already listened to the webinar, it’s a good idea to start there. Beyond that comprehensive overview, you may find these additional questions and answers helpful:

Q: How has the salary threshold changed with the new overtime rules?

A: The new minimum salary level is the biggest change with the new rules. This salary level — the amount an employee has to earn to qualify for exempt status (to be paid salary with no overtime) — has more than doubled. So with this first factor alone — before you even get into job duties tests — millions of workers previously paid a salary with no overtime will no longer qualify for exempt status. The minimum salary level has increased from $455/week to $913/week, which comes out to $47,476 a year. If you’re like a lot of companies, you have employees currently paid on a salary basis making less than $47,476 a year — and all these workers have to be reevaluated and most likely converted to hourly pay with overtime.

Q: Can employees still be considered non-exempt salaried?

A: Yes, they can. If an employee doesn’t qualify for an exemption, you can still pay the employee a salary. However, because they are not exempt, they’re covered by the FLSA minimum wage, overtime and recordkeeping requirements. So even though you can pay them a fixed salary, you must keep careful records of all hours worked — and if they work over 40 hours in a workweek, pay them overtime at 1½ times their regular rate. You can certainly prohibit overtime while paying a salary, but you’re obligated to maintain time records and pay the overtime rate for any hours over 40.

Q: I realize we must pay eligible employees for any overtime hours, but how can we prohibit this in the first place? What can we do to prevent unauthorized overtime?

A: The best way is to implement a strict overtime-approval policy and to effectively communicate it to all affected employees and their supervisors. There are a few important “don’ts” surrounding this question as well. First of all, don’ t permit non-exempt employees to work off the clock, even if they want to learn something new, catch up or get ahead. If employees work beyond their scheduled hours, despite the rules, that’s a disciplinary issue, but you must still pay them for any extra time worked. By law, overtime may not be waived under any circumstances. Second, be clear with the rules for working overtime in your workplace, including getting permission by a manager or supervisor. But again, the law requires you to pay for all hours worked, regardless of whether you approved the person working extra hours. You can discipline employees if they work overtime that you didn’t authorize, but you still have to pay them for the time worked.

Q: I understand the exemption for highly compensated employees changed, too. Can you explain this?

A: The highly compensated employee (HCE) exemption, which was created in 2004, has a higher minimum salary requirement and lower, more relaxed job duties test than the other FLSA exemptions. The new rule raises the minimum salary level for the HCE exemption from $100,000 a year to $134,004 a year. To qualify, the employee has to receive at least $913 a week on a fixed salary or fee basis, and the rest can come from non-discretionary bonuses, incentive payments and commissions.

Regarding the more relaxed, job duties test, the employee’s primary work still must be non-manual work. Plus, the employee must regularly perform at least one of the exempt duties or responsibilities of an executive, administrative or professional employee. The only thing that has changed in the test is the minimum salary requirement. So even a worker making more than $134,000 a year has to satisfy the job duties test to be exempt from overtime, which is something most employers aren’t aware of.

Q: Does the overtime requirement take effect December 1st, or the payroll period that includes December 1st? For some of us, the effective date may fall in November, right?

A: The effective date is clearly December 1st, so if this date falls in the middle of your payroll period, you need to make sure you’re in complete compliance by this date. Technically, if your payroll period covers dates before and after December 1st, even within the same payroll period, you’d need to honor two different employee classifications. Obviously, this would be complicated, so it’s best to make sure you’ve switched over by December 1st. If your pay period starts in November, make plans to get your business in compliance a little bit early to cover this effective date.

Q: Are we required to send out an employee communication about the new law to our staff?

A: This is not a requirement but, rather, a best-practice suggestion. If you only have a couple of employees who will be affected, I wouldn’t suggest you reach out to your entire workplace. You can deal with these employees directly. A mass communication (most likely email), however, is appropriate if you’re hearing chatter among employees, there’s unrest or confusion, or you have a large company where a lot of employees are going to be impacted. In this case, it’s a good idea to stress that this is a federal law, not a company initiative, and that anyone whose classification is changing will be contacted individually.

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