The recent changes to the Fair Labor Standards Act have been debated for over a year now. Employers and employees are scrambling to see what these alterations mean for them before they are enacted on December 1, 2016.
The Fair Labor Standards Act, or FLSA, was established in 1938 to protect the rights of workers by:
- Introducing the 40 hour work week
- Setting a standard minimum wage
- Guaranteeing time and half overtime for certain jobs
- Setting a minimum age for workers
FLSA Changes for 2016
The proposed changes enacted by Congress focus primarily on the compensation of salaried employees performing overtime duties. In the past, hourly workers that continued to work past their 40-hour workweek enjoyed overtime compensation. Salaried employees working over 40 hours enjoyed a set yearly salary that compensated them accordingly. However, the proposed changes aim to alter this caveat. Salaried employees, under a certain yearly income level, will no longer be allowed to work over 40 hours without being compensated hourly as well. These changes include:
- Setting the standard salary level to the 40th percentile in the lowest earning census region
- $913/week or $47,476/year
- Adjusting the yearly compensation requirement for highly compensated employees, or HCE, to $134,004/year
- Beginning a process of review every three years to adjust the standard salary level to offset market change
How does this affect employers?
These amendments could pose serious questions to employers and employees alike. Essentially, these changes challenge the format for overtime and compensation requiring serious alterations to business practices across the board. The following points demonstrate several areas of concern.
- Employers must make sure they are compensating employees accordingly under the new guidelines
- Employees making less than $913/week or $47,476/year will now be eligible for overtime
- Employers must now track their employee’s hours and make sure they are complying with the changes
- Telecommuting positions pose questions about tracking hours for employees working from home or while traveling
- Employers will need to maximize the efficiency of their employees to reduce the amount of overtime in general
The effective date for the FLSA changes is December 1, 2016, with a provision that demands regular reassessment every three years. Although this change may call for a drastic or severe overhaul to your workforce, subsequent changes will only adjust the salary level of protected employees.
Are you prepared for these changes?
Talk with a TPG professional now!