Today the U.S. Department of Labor announced its changes to the Fair Labor Standards Act (FLSA) to expand eligibility for overtime pay to approximately 4 million workers. The new rules will significantly affect employers with exempt, salaried employees who are currently making less than $47,476 per year. These new requirements will take effect on December 1, 2016, unless Congress intervenes. We encourage affected employers to contact Best & Flanagan’s labor & employment law section to begin planning the transition as soon as possible.

Under the FLSA, an employee is entitled to minimum wage and overtime pay, as well as to records of hours worked and payment, unless s/he is “exempt.” Under the current rules, employees are exempt from the FLSA if they meet both parts of the following test:

1. They earn a salary of at least $23,660 per year; and
2. Their job duties primarily involve administrative, executive, or professional functions.

The new requirements raise the salary basis from $23,660 to $47,476 per year. This means that for any employee paid less than $47,476 per year:

• Employers must pay the employee overtime pay (time and one-half) for each hour of work performed over 40 hours per work week;
• Employers must pay the employee an hourly wage that complies with minimum wage laws; and
• Employers must keep detailed records of the hours worked by and payments made to the employee.

The Pew Research Center estimates that the proposed changes will have the greatest impact on 1) first-line managers of retail sales workers and administrative or office support staff; 2) accountants and auditors; 3) general, operations, and financial managers; 4) designers; and 5) human resource workers and managers. Teachers and some seasonal workers are excluded from the proposed change.

The U.S. Department of Labor increased the Wage & Hour Division’s budget by $60 million to enforce the new rule, so we strongly encourage employers to evaluate whether their employees are properly classified under the new rules.

Best & Flanagan’s labor and employment attorneys have already begun advising clients about the impact of the new regulations on their businesses and to assist with implementing the new rules. Please contact us with any questions or to schedule a one-on-one discussion of how these changes may affect your company.