Department of Labor Final Ruling on fair Labor Standards Act

On May 18th, the Department of Labor (DOL) issued a final ruling regarding overtime pay and employee classification that may dramatically impact many small businesses.

In this ruling, the DOL:

1. Nearly doubled the minimum required salary from $23,660 to $47,476 per year.
   1. The base salary is one of three required tests for a white collar employee for determining if they are exempt from receiving overtime pay for any time worked beyond 40 hours per week.
2. Raised the compensation level for highly compensated employees from $100,000 to $134,004 annually.
3. Includes an automatic update to the salary and compensation levels every three years.

This ruling will affect nearly 4 million workers and will take effect on December 1, 2016.

The DOL plans to increase enforcement of employee classifications in the upcoming year to ensure compliance with this new ruling.

While this salary level is not the sole determining factor when it comes to overtime pay, it is a significant part of the three tests that must be met in order to claim the white collar exemption. The other two tests did not change with this ruling and are as follows:

1. Employees must be paid on a salary basis that is not impacted by changes in quality or quantity of work (i.e. hours worked)
2. Their salary must meet the minimum salary level (as outlined above)
3. Their primary duties must pass the “standard duties test”
1. Keep in mind that job titles never determine except status under the FLSA

With this ruling taking effect before the end of the year, it is a good time to look at how you have your employees classified and what you are paying them, not just in salary, but in total benefit packages as well.

There are several different strategies that you may need to implement in order to mitigate some of the exposure you may have with this new ruling and to ensure that you have the right balance between employee pay, benefits, and duties.

By making sure you have the right strategies in place and the right policies to govern by, you can make a difficult situation such as this into a win-win for you, your company and your employees.

Ellenton CPA is here for you as a resource for you and to give you further guidance on how to navigate through this challenging and complex ruling.

Copyright Ellenton CPA 2016 - 941-345-1682