On May 18, 2016, the Department of Labor announced the final rule on the changes to overtime exemptions that have been discussed for almost a year. The new rule requires that these employees who make under $47,476 annually to be paid overtime for any hours worked over 40 in a week, even if they are considered an executive, administrative or professional level employee under the Fair Labor Standards Act. Employer have a lot of questions about what this means for their employees. We answer some of the most common questions we have heard so far.
What size employer does this change apply to?
The change in overtime regulations is a change to the Fair Labor Standards Act (FLSA) which applies to nearly all employers whether you have one employee or 100+ employees. It applies to private sector employers and Federal, State, and local governments.
How do I know if my employees are impacted by the new regulation?
Any salaried exempt employees (those you do not pay overtime to and you do not track hours for) who fall under the administrative, professional or executive duties tests (see DOL definitions) who are paid less than $47,476 per year are impacted by the change in the overtime regulation.
We have developed a report you may access through the Manager Self-Service Portal on our website. The report will list all of the employees whose current salary is less than $47,476 per year. After logging in, click on My Company and then choose Informer (Ad Hoc Reporting) from the drop down menu. This will give you access to some additional reports we have built, including the OT Eligibility Report. Find the OT Eligibility Report in the list and click Launch. Then click Launch Report to see your results. You can export this list to Excel by clicking Export Results. (We are aware that the ability to export the results is temporarily not available but is in the process of being restored. In the meantime users are able to view the OT Eligibility report results within the system.)
What are the requirements for an employee to be classified as salaried exempt?
A salaried exempt employee is an individual who is paid a flat salary of at least $23,660 per year (increasing to $47,476 in December 2016), regardless of the number of hours they work or their production, who also does not receive overtime payment for any hours worked in excess of 40 in a week.
To legally be classified as exempt from overtime, professional, administrative and executive employees must meet 3 requirements:
- They must be paid on a salary basis (not hourly, piece rate, etc.).
2. They must be paid at least a minimum salary of $23,660
(increasing to $47,476 on December 1, 2016).
3. They must pass the FLSA duties test for overtime exemption based on their work.
Also see the A Plus Benefits Exempt Employee Justification Form.
The second requirement is the only one that changed in the new regulations. The salary basis requirement and the duties test stayed the same
What about salaried/commissioned outside sales employees?
Employees who fall under the outside sales duties test (see DOL definition) are not affected by the change in the overtime salary threshold. There is no threshold for salary for the outside sales employee exemption.
Where can I access some additional resources?
Here are some pieces of information that may be helpful:
- A copy of the PowerPoint slides used in the webinar.
- A recording of the webinar.
- A copy of the Employer Compliance Update for Overtime Changes referenced in the webinar.
- A link to the Overtime Calculator referenced in the webinar.
- A copy of the Exempt Employee Justification Forms referenced in the webinar.
- Instructions for accessing the OT Eligibility Payroll Report through the Manager Self Service Portal.
- A link to the DOL FAQ Sheet for the final rule on overtime.
- A link to the DOL Small Business Compliance Guide on the final overtime rule.
Who do I contact if I have more questions?
If you have any questions, please feel free to reach out to an HR Business Partner at A Plus Benefits at 1-800-748-5102 or email@example.com for assistance.