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Tuesday, April 19, 2016   (0 Comments)
Posted by: Brian Schulte
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Contributed by the Employers Association Forum, Inc. (EAF)

The Fair Labor Standards Act (FLSA) tells employers how they must pay their employees.  It requires that employees be paid at least minimum wage for all hours worked and that employers pay them time-and-one-half for all hours worked over 40 in the workweek.  There are some exemptions from these rules.  Currently, the Department of Labor (DOL) has issued proposed rules that would change some aspects of the “White Collar” exemptions that are defined in the regulations.  The result of these proposed changes is expected to dramatically decrease the number of individuals who may be considered “exempt.”  Here’s what you need to know:

1) The final rule is expected to raise the minimum guaranteed weekly salary for exempt employees to $970 per week ($50,440 per year).  It is likely the rule will include a provision to adjust this salary annually for inflation.  It is uncertain whether or not bonuses, commissions or other incentive payments may be included when calculating an exempt employee’s pay for purposes of meeting the minimum pay requirements. 

2) Final rules were submitted to the Office of Management & Budget on March 15 for approval and are expected to be published no later than early July.  It’s been predicted that final rules could be published as early as the end of April or beginning of May.

3) Proposed rules left the door open for the Department of Labor to rewrite the duties test for each of the 5 white-collar exemptions.  However, there has been no announcement from DOL representatives stating whether or not the duties tests have been updated. 

4) The new regulations will become effective 60 days after the final regulations are issued.

5) There is a proposed bill in Congress seeking to delay publication of the final rules. However, this bill probably won’t be passed because President Obama will likely veto it and there doesn’t appear to be enough support for the bill to override the veto.

If your company hasn’t already done so, now is the time to identify those individuals who may be affected by this change. Once you’ve identified them, your company can then begin the process of determining what changes need to be made in order to either maintain your employees’ exemptions and/or reclassify them as non-exempt.  This assessment is going to help you determine the potential impact this will have financially on the organization.

These changes will likely require employers to adjust their payroll budgets. Employers will need to analyze whether it is more beneficial to increase an exempt employee’s pay to meet the new wage requirement or convert them to hourly, non-exempt employees.  Part of this analysis will naturally have to include an estimate of how much time each person who is currently exempt works each week.  Depending on the nature of your business, your exempt employees could work a typical 40 hour workweek or work on average 50-60 hours a week.  In order for you to determine whether or not it makes since to increase pay or convert the individual to an hourly, non-exempt employee you’ll have to calculate the cost of paying someone overtime versus increasing their guaranteed pay to $50,440. 

Once the decision is made to convert an employee to non-exempt, the individual will have to begin recording their time and the company will have an obligation to pay them overtime for any hours worked over 40 in the workweek.  There’s a sense of pride…that someone has achieved a certain status within the organization…when they no longer have to punch a timeclock.  Because of this, it is important for companies to communicate with employees why their status has changed.

Not-for-profit employers are going to be particularly impacted by these new regulations. Many of these organizations don’t have the funds to pay their exempt employees the monies necessary to maintain the exemption.  Further, the individuals who work for not-for-profit companies frequently do so because they are committed to the work the organization is doing in the community. Because of this employee commitment, these organizations are going to be particularly challenged with enforcing the time keeping requirements and ensuring employees don’t attempt to “work off the clock”.  It’s imperative that a commitment to and strict enforcement of the time keeping guidelines be promulgated from the Executive Director.  There has to be a willingness on the part of the organization to discipline those individuals who also work “off the clock” and/or neglect to maintain accurate records of actual hours spent working.

If the duties tests are revised, the company will need to conduct an even more thorough evaluation of an individual’s exempt status in order to determine whether or not they need to convert certain positions to non-exempt and begin paying overtime to those individuals who fill those roles.

Finally, employers are encouraged to review paid time off policies, insurance documents, and 403(b)/401(k) documents in case there are any benefits provided to exempt employees that are different from those available to non-exempt individuals.  The employer may want to reword policies and documents include certain non-exempt employees in these benefits.

The Department of Labor has posted FAQs and a Fact Sheet on their website to explain the nature of the changes they have contemplated. 

Contributed by the Employers Association Forum, Inc. (EAF). EAF is a non-profit corporate membership-based association dedicated to serving the business and HR communities with world-class HR tools, hotlines & legal compliance, news & trends, surveys & economic data, benefits & insurance, risk management, training & consulting, and leadership & organizational development. Click here to learn more about EAF membership benefits

Additional Resources


The Edyth Bush Institute for Philanthropy & Nonprofit Leadership’s HR Professional Affinity Group is hosting its next meeting on May 10th at Second Harvest Food Bank (411 Mercy Dr, Orlando, FL 32805) from 8:00 am to 9:30 am and it is titled “Preparing for New Overtime Rules - HR professionals need to be on top of the developments surrounding an overhaul to current white-collar exemptions under the Fair Labor Standards Act.”

An attorney from Baker and Hostetler will present on the new overtime laws.

For more information and to register visit:



Big Changes in Employment Law: How Your Nonprofit Should Prepare for New Overtime Rules Webinar hosted by Edyth Bush Institute for Philanthropy & Nonprofit Leadership on May 25th from 11 a.m. – 12 noon. 

The Department of Labor has issued proposed rules that will significantly increase the number of employees who are entitled to overtime pay. The rules, which are expected to be finalized in the next several months, will primarily affect employees who make between $23,660 and $50,440 who engage in duties that are more supervisory in nature.  What are the implications of the new rule for your nonprofit? How will these changes affect how you manage your employees? Will it affect your budget? How should you prepare?  Learn the answer to these questions and more during a 1-hour webinar led by attorneys Justine Thompson Cowan of Cowan Consulting for Nonprofits and Nichole M. Mooney of Dean Mead.

For more information and to register visit:



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