Major Changes to FLSA Announced by U.S. Department of Labor

Overtime Provisions and Employee Classifications

The U.S. Department Labor (DOL) announced dramatic changes to the overtime provisions of the Fair Labor Standards Act (FLSA) – likely to have a major impact on a large number of employers.

The new rule (dol.gov/whd/overtime/final2016) will double the income level under which employees must be classified as non-exempt and, therefore, must be paid overtime for any hours worked over the standard 40-hour work week.

Under the current rules, only workers earning $23,660 or less automatically qualify for overtime. Under the new rule, all salaried workers, regardless of title or duties, are eligible for overtime if they earn $47,476 per year ($913 per week) or less.

The White House estimates that this change will effectively give around five million workers a raise while strengthening overtime protection for another ten million.

This is the first time the overtime ceiling has been raised since 1975, when the $23,660 salary covered 61 percent of workers. Proponents argue that this change is necessary to keep pace with inflation and eliminate potential abuses by employers who misclassify employees or effectively force those working long hours to work for less than the minimum hourly wage.

While the DOL heralds this as a major win for working Americans, this rule change will send huge ripples through employers’ cost to do business and classification of employees and will require a major shift in payroll and HR processes, as well as retraining employees to avoid doing work outside of business hours.

The rule takes effect on December 1, giving employers very little time to make major adjustments in terms of budgets, payroll activities, employee duty assignment and classifications, time capture systems and making the cultural changes necessary to ensure that employees accustomed to working after hours limit their activities to set work hours.

PEOs like Sunkiko are positioned to provide the guidance and expertise needed to establish a viable and cost-effective plan of action, as well as the extra sets of hands that may be required to begin implementation.

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