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The much-anticipated new Fair Labor Standards Act (FLSA) overtime exemption rules for white-collar workers were released today. With these rules comes a multitude of questions from employers. Here we have outlined some of the initial questions you may have as an employer.

Q: When does this become effective?
A: The new rule becomes effective on December 1, 2016, which is a Thursday. This may cause some confusion as it is in the middle of the workweek. Many employers will need to make these changes for the work week that includes December 1, 2016.

Q: What is the new minimum salary requirement?
A: Under the current rules, the minimum salary requirement for exemption was $455 a week, or $23,660 per year. Under the new rules, the minimum weekly salary is $913, or $47,476. This change alone is expected to allow more than 4 million workers to qualify for overtime pay.

Q: Have the duties changed?
A: No. The new regulations did not make any changes to the duties test for executive, administrative and professional employees.

Q: Is there an exemption for small businesses?
A: No

Q: How does the new exemption impact employers?
A: Many small business, government and non-profit employers currently utilize what is called the “white-collar” exemption to avoid paying certain employees overtime. In order for employees to meet this exemption, there are three tests:

  • Perform executive, administrative, or professional duties (the duties test)
  • Make less that a certain weekly salary (the salary test)
  • How an employee is paid (pay type test)

Under the new rules, if an employee is salaried and performing executive, administrative or professional duties and is being paid less than $913 per week ($47,476 annually), they are now no longer exempt from the FLSA’s minimum wage, overtime and record-keeping requirements.

Q: What do employers need to do?
A: Some initial steps employers should take include:

  • Identify employees who are currently exempt but are making less than $47,476 annually.
  • Determine the number of hours those employees work, and if there is currently no time reporting system in place, develop and implement a time reporting system.
  • Determine the financial impact of these new rules, if applicable.
  • Depending on the outcome, determine the appropriate course of action, which may include increasing salaries, reassigning work, and / or limiting hours to 40 per week.

We all know December 1 is really just around the corner. Reviewing the status of your employees and identifying what next steps need to be taken should be done sooner rather than later. The Selden Fox Accounting Solutions team is able to assist employers in this employee analysis, as well as evaluating what necessary changes may be most practical for your organization.

Brian Eagan

Brian Eagan specializes in providing high level interim CFO and Controller work for small to medium size businesses, including non-profit and local government agencies. In this role, Brian makes himself highly accessible to clients by phone and e-mail, in addition to appreciating the importance of performing some of these services onsite at clients’ offices.