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Are You Prepared for the December 1 FLSA Changes?

As you may have heard by now, the federal overtime rule is changing as of December 1, 2016. The implications for employers are significant. Of primary importance is the new salary threshold for exempt workers. The salary requirement is rising to $913 per week or $47,476 annually from a general requirement of two times minimum wage or $41,600 annually in states like California. Employers must now consider what is the best course of action to address currently exempt employees that are receiving salaries under the new threshold.

First and foremost, be sure to examine the employee's job against the duties test to ensure that they meet the test of exemption. The Fair Labor and Standards Act and California wage orders have information on the types of duties that qualify. Assuming that the employee passes the duties test of exemption, employers can look to raise the salary to the new threshold and continue treating the employee as an exempt employee or they can leave the employee at a rate of pay below the threshold, but begin treating the employee as a non-exempt employee. Employers should look at the cost of each and potential change management issues with whichever approach they take. For instance, raising the employee's pay due to the law change can cause other employees to feel slighted, because they did not get the adjustment. Be prepared for a response as to why that course of action was taken. In another instance, leaving the employee at a rate of pay below the salary threshold and making them non-exempt will require more change management. Employees should be educated as to why they now need to record their times in and out of work, be paid a hourly rate, take meal and rest periods, as well as all the other provisions that pertain to non-exempt employees. Bottom line, be prepared for the change management that must go along with whichever approach your organization proceeds with.

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