Employers Must Comply With New FLSA Salary Thresholds

Employers Must Comply With New FLSA Salary Thresholds

By DeAnn Chase November 11, 2016    Category: Business Law     Tags: administrative and professional (EAP) as non-exempt employees executive exempt employees Federal Labor Standards Act (FLSA) minimum wage overtime salary thresholds

Employers Must Comply With New FLSA Salary Thresholds

California employers must be prepared to implement . Effective December 1, 2016, businesses that employ any employee earning an annual salary under $47,476 must re-assess and evaluate these new federal wage requirements affecting employee compensation.

The FLSA’s two-part compensation and duties test for exemption has not been changed by the new regulations. Instead, the minimum amount of salary required to qualify for the exemption has been revised. The final rule issued by the DOL increases the income threshold for employers to $913 a week, which is $47,476 annually. This new threshold is more than twice the current minimum salary.

Under the compensation test, an exempt white-collar employee must be paid a minimum and predetermined salary not subject to reduction because of variations in the quality or quantity of work performed. Under the duties test, the employee’s primary job duty must involve qualifying responsibilities as defined by the regulations, such as making important business decisions, supervising a department, or practicing in a scientific field.

Individuals covered under the FLSA are classified as non-exempt employees who must therefore receive overtime pay, i.e., compensation for hours worked in excess of 40 in a workweek at a rate not less than one and one-half their regular rates of pay (“time-and-a-half”). The FLSA exempts individuals employed in a “white collar” or executive, administrative, and professional (EAP) capacity from this requirement, thus, “exempting” employers from paying them for overtime work. Most professional or “white-collar” employees usually satisfy FLSA’s tests regarding compensation and duties, and are thus exempt from federal minimum wage and overtime requirements.

In May, the Department of Labor (“DOL”) updated regulations affecting workers classified as “exempt” or “salaried” employees,  including white collar workers and EAP employees. The DOL’s purpose in passing these new regulations was to modernize pre-existing regulations governing exempt employees, as well as FLSA minimum wage and overtime pay protections.

The new regulations also establish a mechanism for automatically updating these salary and compensation levels every three years, while ensuring the usefulness of the current tests for distinguishing between overtime-protected white collar workers and bona fide EAP workers who may not be entitled to overtime pay.

Many of the changes do not take effect until December 1, 2016. However, it is imperative for business owners to ensure that they are properly classifying workers under the FLSA requirements, and just as important to adequately prepare for implementing the new regulations in December. If you are an employer in California, it is important to obtain sound legal guidance for your business. DeAnn Flores Chase and her team of experienced attorneys can advise you on all your business needs. Contact Chase Law Group, P.C. at (310) 545-7700 or visit www.chaselawmb.com to schedule a consultation.