A recent rule change by President Obama could possibly make millions of workers eligible for overtime impacting businesses of all size and all industries nationwide. The rule is set to go into effect in 2016.
Some background … The Fair Labor Standards Act (FLSA) determines minimum standards in four main areas of federal labor law: minimum wage ($7.25/hr), overtime (time-and-a-half pay), definition of “hours worked,” and standards for record keeping of time and wages. The FLSA was established to increase the federal minimum wage and address treatment of specific classifications of workers. They determine the rules for exempt (salaried) and non-exempt (hourly) employees.
There are a few rules required for an employee to be considered exempt from the FLSA, however there is one that President Obama aims to change … the minimum salary requirement.
Now, according to the FLSA, an exempt employee must be paid a minimum of $455/wk or $23,660/yr. President Obama intends to change the rule by increasing the minimum pay from $455 to $970/wk, or from $23,660 to $50,440/yr.
The minimum salary level is meant to cover all professionals with high skill levels, executive level responsibilities, and significantly higher income than the average worker. This threshold for the “exempt” salary has remained unchanged since 1975 when it was last modified … 40 years unchanged!
So what does that mean for your business?
This significant change will likely affect many workers in your business, and with the newly raised threshold, businesses will have to pay the workers that fall below the threshold overtime if they exceed 40 hours. So, for all employees who currently earn between $23,660 and $50,440per year, employers will have to reclassify them as non-exempt, track their hours, and pay them time-and-half for hours over 40 per week. Many businesses must now find out how many employees will be impacted in this change and develop a plan for managing and tracking time.