In the article below, we informed readers that effective December 1, 2016, sweeping changes will be implemented with regard to the Fair Labor Standards Act (“FLSA”) that will require employers to more than double the minimum weekly salaries of exempt employees in order to maintain the exemption and avoid paying overtime. Under existing regulations, employers have to pay employees a weekly salary of at least $455 to maintain the exemption. Under the new regulations, employers must pay a minimum weekly salary of $913 to maintain the exemption.
As a practical matter, most employers probably won't face a doubling of salaries for their exempt staff as weekly salaries tend to be substantially higher than $455 for most exempt employees. Yet, many employers will still face a substantial and sudden economic impact as of December 1st.
There are a few ways to avoid or minimize the financial impact of the new regulations. First, consider the fact that many exempt employees actually don't work overtime (more than 40 hours per week). For these employees, there would be no need to increase their pay to maintain the exemption. Exposure for occasional overtime work could be controlled by carefully managing overtime hours and requiring approval before overtime is worked. Employers should therefore carefully analyze the hours actually worked by their exempt employees to determine if there is even a need to comply with the new regulations.
If your exempt employees actually do regularly work overtime, consider surrendering the exemption and paying hourly. Consider this example. An exempt employee making $455 per week is making $11.38 an hour based on a 40-hour work week. After December 1st, this employee will be making $913 per week, or $22.83 per hour. If this same employee is converted to hourly pay at $11.38 an hour and consistently works 10 hours of overtime each week, his weekly pay would be $625.70 — far less than the $913 per week required by the new regulations.