Last March, President Obama directed the Labor Department to make overtime pay an option for millions of additional workers by narrowing the “white collar” exemption under the Fair Labor Standard Act (FLSA), which would more restrictively define the duties test and raise the threshold for the salary basis test.
Originally intended to go into effect this past November, it now looks as if it will be the first quarter of this year before it is implemented. The proposed narrowing is to account for inflation. In 1975, the amount was $155/week and was not increased to the current $455/week until 2004, the last time the threshold was raised. When adjusting for inflation, the 1975 figure would be $970/week today, while the 2004 figure would be the equivalent to $533/week.
In a fact sheet issued by the White House regarding President Obama’s decision, it states “millions of salaried workers have been left without the protections of overtime or sometimes even the minimum wage. For example, a convenience store manager or a fast food shift supervisor or an office worker may be expected to work 50 or 60 hour a week or more, making barely enough to keep a family out of poverty, and not receive a dime of overtime pay.” The sheet also indicates that 12 percent of salaried workers “fall below the threshold that would guarantee them overtime and minimum wage protections” and that the FLSA regulations are outdated.
Small business will be particularly hard hit by these changes. Employers will have two primary options to control costs – increase workers’ salaries above the new threshold or keep employees in nonexempt status and pay them overtime. As an employer, you need to regularly review your employee classifications. That’s not always as simple as it sounds. We’re here to help. Give us a call at 678-208-2802 for assistance with understanding the law and how changes will impact your business.