Are you ready for when the $h!t (or FLSA) hits the fan?

Do you have employees that are salaried and making less than $50,000 per year? Are you sure they qualify for exempt status? Are you ready to pay them over 100% more when the FLSA changes go into effect later this year?

Do you have employees that are salaried and making less than $50,000 per year? Are you sure they qualify for exempt status? Are you ready to pay them over 100% more when the FLSA changes go into effect later this year?


The Department of Labor is currently in the pending action phase and finalizing new regulations within the Fair Labor Standards Act (FLSA) for exempt employees. Exempt employees are employees that are exempt from both minimum wage and overtime pay as long as they meet the guidelines set by the FLSA. Most employers assume this as salaried employees. Once the regulations go into effect, which could be as early as July, they will greatly impact your business.  


What are these changes and what to expect?

The Department of Labor is trying to simplify the way employers classify an exempt employee.  They believe that most employees are misclassified; so, the easiest way to force employers to reexamine their employee’s status is to cast a broader net with a significant increase to the wage test.  But wait there’s more! With these recent changes, the Department of Labor has also given themselves an open door to reevaluate the duties test for exempt positions. This could mean even more changes in the future for business owners.


So what can we expect? The proposed salary limit will increase from $455 per week to $970. This will be approximately $50,440 annual salary.  There are varying reports on whether this change will go into effect on or before July 1, 2016. Once the rule goes into effect, employers could have between 60 and 120 days to comply with these new rules based on an article posted by Society of Human Resource Management.


How do you prepare your business for the changes?

The only thing you can do is prepare for the inevitable. As mentioned above, the effective date of these changes is ambiguous and sources are reporting different timelines for implementation.  StaffScapes recommends that you review these key areas to prepare for the imminent changes:

·         Review your annual operations budget

o   Could you give a pay increase if necessary?

·         Identify the employees that this will impact

o   How many hours do they work? What hourly rate will they be paid? Will their schedule stay the same?

·         If you have to move employees to hourly, establish your timekeeping system

o   Will you use an online time clock, spreadsheet, etc.?

·         Review your current work related policies

o   Define work time for employees including afterhours access to emails and phone calls

o   Update your overtime policy—will you allow overtime or not? With or without approval?

o   Meal and Rest Breaks—Standards  set by Department of Labor

·         Be prepared to have the hard conversations

o   Once you have reviewed everything, there may be one or two employees you have to reduce hours or even let go. Are you ready to explain these changes?


How do you prepare your employees for the change?

Many times, employees look at salary as a status within the company.  Educate your employee on the changes that you will be making to stay compliant with FLSA.  Not only will this education session reinforce policy changes, but it will also set the expectations for the employees moving forward.  Here are a few key employment areas to discuss with your employee:

·         Answer questions about pay and show the calculation.

o   For example if an employee is making $1200 gross bi-weekly that would be $15.00 per hour based on a 40 hour work week.

·         Make the employee aware of pay fluctuations.

o   If they work 38.9 hours that is what they will be paid—not a full 40 hours

·         Review the overtime, meal and rest period, and work time policies with hourly employees

o   This will help give employees clear and concise expectations on what will happen.

o   Do not leave room for interpretation—this can open you up to more issues in other areas of the FLSA or Department of Labor.

·         Be ready to have the hard conversation and make hard decisions

o   Are you able to keep all your employees?

o   Will you have to reduce hours or terminate employees?

o   Can you enter into pay negotiations with employees?


As we have mentioned, this is a major change to the exempt classification. Any preparation that you can do now will help when these regulations go into effect. There are still a lot of variables and loose ends being finalized. As these changes move forward, continue to check StaffScapes website for more updates or please contact us at 303-466-7864.