The Federal Government is putting in motion dramatic changes to how the law treats your business and your employees when it comes to overtime. This is something you and your employees should be aware of, and we all need to start adjusting and planning now so that when the new regulations go into effect on December 1, 2016 you are ready. Here is a quick summary of the adjustments under the Fair Labor Standards Act (FLSA) of 2016, but please get in contact with Ceterus if you need help implementing compliance for your business.
- On December 1, 2016, the FLSA raises the threshold for employees eligible for overtime pay to 913/week. This means the government does not require employers to pay overtime to an employee if their W-2 meets or exceeds this amount by year-end. This can be a bonus, capped at 10% of the threshold.
- The overtime hours threshold remains at anything over 40 hours/week (1.5x normal pay).
- The FLSA also provides for the pay threshold to automatically adjust every 3 years. This threshold will change again on December 1, 2019.
- The FLSA maintains the old “duties test” for employees considered “exempt” in addition to the new thresholds above (exercise of discretion and independent judgement).
- Generally, a business is not subject to these thresholds if it has less than $500,000/year in gross volume of sales.
- However, individual employees at exempt businesses can still be subject to FLSA if they are engaged in interstate commerce.
- This definition is very broad and includes:
- making out-of-state phone calls;
- receiving/sending interstate mail or electronic communications;
- ordering or receiving goods from an out-of-state supplier; and
- handling credit card transactions or performing the accounting or bookkeeping for such activities.
What to do now:
- Determine which of your employees are below the new threshold.
- Consider providing those employees with a raise and/or bonus to move them above the threshold before the end of 2016.
- For those still below the threshold, determine if they engaged in interstate commerce.
- For this list of employees, you can set up a time tracking system which will monitor hours on a weekly basis and provide you with the knowledge of an employee’s status including when you should either send them home, or pay them overtime.
- Talk to Ceterus about adjusting your schedule in order to gain efficiency and ensure each employee is working 40 hours per week.