News & Events Listings

By Denise Pisciotta, Senior Manager

It only took 10 years, but this summer the Department of Labor (DOL) announced sweeping changes to the federal overtime rules. The most significant change is raising the standard salary level by which salaried employees are now eligible for overtime pay. The new rules will go into effect December 1, 2016 and apply to both for-profit and non-profit entities.

Currently, the only employees eligible for overtime pay are those who earn $23,660 or less. Salaried employees who earn above the limit, are eligible to receive overtime pay if they are not classified as administrators, executives or professionals.

The new rule requires that all full-time salaried employees, regardless of their title or duties, to be eligible for overtime pay if they earn $47,476 or less. The overtime rate is considered 1 ½ times the normal hourly pay rate for work exceeding 40 hours within 7 day work week. Salaried employees paid above this level are exempt from overtime pay if they primarily perform certain duties defined as administrative, executive or professional.

Another threshold change made by the DOL was increasing the compensation level for Highly Compensated Employees (HCE) subject to the minimal duties test from the previous amount of $100,000 to $134,000 annually. The duties test under this requirement is more relaxed than is required for employees paid under standard salary level. HCEs are exempt if they customarily and regularly perform at least one of the duties under executive, professional or administrative. Under the standard salary test, the duties must be primarily to meet the exemption.

Some strategies that you should consider in light of these changes include:

1. Do the math – identify which employees do not meet the minimum salary test of $47,476 or the highly compensated threshold of $134,000. Verify those employees who work more than 40 hours a week. Either accept that these employees are now non-exempt jobs and pay overtime when applicable or retain exempt status by increasing base pay to the standard level.

2. Reduce or eliminate overtime hours – Are you able to reorganize workloads, adjust schedules or spread work hours?

3. Volunteers – Increase the number of volunteers to assist with overtime duties. A volunteer generally will not be considered an employee for purposes of FLSA, if the individual freely provides public service without receipt of compensation.

4. Conduct a due diligence to understand corporate culture and how employees might perceive this change. If change is necessary, develop a communications strategy informing the affected employees.
Keep in mind, employers are still responsible for satisfying other requirements to remain in compliance with labor regulations. Given the complexity of these new regulations and how they overlap with tax rules and other issues that businesses face, we highly recommend that you consult with a UHY professional to ensure the best outcome for your business.

Important Update on FLSA:

On Nov 22, 2016, a federal judge issuing a preliminary injunction blocking the Department of Labor’s new “white collar” overtime pay mandate. Employers, including not-for-profits, are not required to comply with, or implement, the requirements of the Overtime Rule that was slated to go into effect on December 1. U.S. District Judge Amos L. Mazzant III in Sherman, Texas said the Labor Department exceeded its authority under the Fair Labor Standards Act. The case is Nevada v U.S. Department of Labor, 16-00731, U.S. District Court, Eastern District of Texas (Sherman). The injunction will likely remain in effect for months until the case is decided.

Click here to read full Not-For-Profit Insider.