What is FLSA Overtime?
The FLSA (Fair Labor Standard Act) provides the rules regarding overtime pay for employees, determining who is eligible for overtime pay and who is exempt. The FLSA describes overtime as working more than 40 hours in a workweek. If an employee who is considered “non-exempt” exceeds the 40-hour workweek, they are entitled to one and a half their regular compensation for every hour of overtime.
FLSA recent events
The Wage and Hour Division (WHD) of the Department of Labor (DOL) is attempting to pass a federal rule that will double the salary threshold required (from 23k to 47k) for exemption from overtime pay, and automatically adjust it every three years to the 40th percentile of full-time earnings. A higher exemption salary threshold means that more people will qualify for overtime pay. If the new rule is passed, it is predicted that over 4 million previously exempt workers would now be classified as non-exempt, or would have their salary increased to meet exemption requirements. This drastic change caused a backlash from many states who then filed a lawsuit against the DOL questioning their authority to make such a drastic change. Due to the lawsuit, the federal judge has ruled to pause this motion until the DOL’s authority is determined. This federal injunction means that businesses will continue to follow the existing overtime rules that were last updated in 2004 until the judge officially rules on the new regulations.
Who qualifies for exemptions?
Currently, exemptions are determined based on a three-part test: Does the employee get paid at least the minimum salary determined by the FLSA (now $455) per week? Does the employee get paid every week that they perform work (regardless of the amount or quality of the work)? Does the employee perform certain job duties that fall under the “exempt” duties determined by the FLSA? If the answer to all of these questions is “yes,” your employee most likely qualifies for exemptions from overtime pay.
Alternatives to paying overtime can include:
- — Prohibiting any employee to work over 40 hours
- — Splitting shifts between employees
- — Decreasing or increasing workforce
- — Cutting hours
- — Decreasing pay to counteract overtime costs
- — Increasing pay to create exemption
What does this mean for businesses?
With a final decision yet to be made on the DOL’s new regulations on overtime, employers are left with uncertainty. During this time, all employers must be aware of changing FLSA regulations to ensure that they are accurately and honestly compensating employees.
This uncertainty also places a greater importance on accurately tracking employee’s hours. Incorporating a timecard application will help employers more accurately record employee’s hours by eliminating manual timecards that can be easily misreported. Some timecard applications allow the employer to set the maximum amount of hours allowed for each employee and will warn the employer when the employee is nearing his maximum hours and alert him if he should exceed it. This small application can mean huge monetary savings with little change to employers’ business practices.
No matter what the employer chooses to do in response to the lurking overtime law, he must ensure that his actions stay in line with other labor regulations and that all changes are lawful and ethical.