Since its inception in 1938, the Fair Labor Standard Act (FLSA) has played a key role in maintaining fair workplace practices in the United States by discouraging employers from overworking and exploiting employees. Overtime law mandates any hours worked beyond the standard 40-hour work week are paid “time and a half” the regular hourly wage. While it may seem straight forward, there are requirements unique to each employee work classification with new changes on the horizon.
Non-exempt – Employees with this classification are eligible for time and half payment for OT hours worked but only if they meet the following requirements:
- Paid hourly wage or salary equivalent
- Maintain time records (includes off-site workers)
- Wages can be docked for late arrival, early departure or not showing up
Employers should research specific laws that govern their worksites. Some states have stricter rules regarding overtime, including that time and half must be paid on hours worked over 8 hours a day.
Exempt – Salaried employees with this classification are NOT eligible for OT pay if:
- Paid more than $455 per week or over $23,660 a year
- They are managers or have specialized skills that meet all the required “duties” from FLSA
Exempt workers are not required to maintain time records and are not docked for late arrivals, early departures and often must be paid their full salary even if they don’t work a full week.
Is the overtime clock ticking?
The FLSA continues to shift to meet the changing needs of the American workforce. In December 2017, businesses were bracing for an overtime rule change that would have roughly doubled the salary threshold for exempt employees from $23,660 to $47,476. If it weren’t blocked by a federal judge in Texas, businesses would be paying overtime to an additional 4 million workers. Employers were relieved it was halted, but a new overtime plan is slated for March 2019 according to the US Department of Labor (DOL). It is reevaluating the salary level for exempt employees. This could impact companies that employ:
Executives: project managers, VPs
Administrative employees: accountants, marketers, PR reps
Professionals: dentists, lawyers, writers
Employers need to prepare
Although exact changes are unknown, businesses should proactively analyze the potential impact. Determine which exempt employees could be affected and calculate the scenarios: pay raise with no scheduled overtime vs. no pay raise with expected overtime budgeted. Any kind of workplace shift can cause anxiety for employees, so consider discussing how a new employee classification would impact morale and compensation. Communication helps ease concerns and answer questions.
Whether your company operates in one state or many, MidwestHR, a Chicago PEO, constantly monitors changes in overtime laws that impact small- and medium-sized businesses. We examine viable options and recommend the best path forward. By outsourcing your HR to our team of experts, you can stay focused on growing your business. Give us a call today at 630-836-3000 so you can feel confident going into 2019.