The misclassification of employees (exempt versus non-exempt) per the Fair Labor Standards Act (FLSA) is one of the most common (and costly) errors employers make when it comes to federal and state employment laws. The financial consequences of FLSA violations can be steep and include fines, interest, attorney fees, and possible criminal sanctions.
In recent news, a proposal has been made to change some of the FLSA regulations around employee classifications that, if passed, could greatly impact most organizations. It appears that a formal announcement regarding the changes will be forthcoming in 2015 with implementation nationwide in 2016.
In short, the minimum salary threshold would increase from $23,660 per year ($455 per week) to $50,440 per year ($970 per week) – even if the employee is classified as a manager or professional. This change could result in an additional 5 million employees becoming non-exempt and eligible for overtime pay. As for the job duties portion of the FLSA classification requirements, no specific changes have been mentioned, but changes could be recommended in the final proposal later this year.
What you need to do
Education and preparation are key to both determining the impact these changes may have on your organization and creating a successful strategy to remain compliant, keep your employees happy, and keep your bottom line healthy. Here are a few factors to consider:
• Make sure your job descriptions are up-to-date and accurately reflect the job duties and core responsibilities of each position.
• Identify those employees/positions that are currently exempt, but may be classified differently under the new guidelines.
• Keep your management teams informed. Make sure they have an understanding of the current and proposed FLSA regulations so they aren’t caught off guard if you are required to reclassify a large number of employees from exempt to non-exempt.
• Determine the impact on your organization and develop a strategy to remain compliant (e.g., raise salaries for some employees to maintain exempt status, change some employees to non-exempt and make them overtime eligible, reduce work schedules, pay lower hourly rates, add more employees to cover the workload, etc.)
Best advice – be proactive. Don’t be caught scrambling at the last minute to evaluate the impact these changes will have on your employees and bottom line.
Compliance is one of our specialties. So, if you need help with these changes and figuring out their impact on your company, simply hit reply and let’s talk.