Compliance is a major challenge for almost every employer. The recent modifications to the Fair Labor Standards Act have caused many organizations to see a spike in compliance risks. FLSA suits hit a record high in 2014, with over 1.3 Billion in back wages recovered. Organizations in all verticals have experienced wage and hour suits of upwards of 20 million dollars.
The Department of Labor expects 5 million employees to potentially be impacted starting in 2016.
The proposed rule is designed to update the salary and compensation levels for white-collar workers to be exempt. Changes will include:
- Setting the standard salary level at the 40th percentile of weekly earnings for full-time salaried workers ($921 per week, or $47,892 annually).
- Increasing the total annual compensation requirement needed to exempt highly compensated employees (HCEs) to the annualized value of the 90th percentile of weekly earnings of full-time salaried workers ($122,148 annually).
- Establishing a mechanism for automatically updating the salary and compensation levels going forward to ensure that they will continue to provide a useful and effective test for exemptions.
The proposed standard salary level represents the most appropriate line between exempt and nonexempt employees because it minimizes the risk that employees legally entitled to overtime will be subject to misclassification based on their salaries alone.
So what do the new FLSA rules mean for you and your company?