The Fair Labor Standards Act (FLSA) rules are being changed on December 1, 2016. You may have heard about it or thought it changed when the president signed it into law. There have been estimates that from four million to nine million workers will be affected by the changes.
Here is a little background on FLSA. The FLSA is the federal law that establishes minimum wage, overtime pay, recordkeeping, and child labor standards affecting full-time and part-time workers. Your state may have additional protections. If the state laws are better for the employee, then those provisions are enforced. For example, the current federal minimum hourly rate is $7.25 per hour. Illinois’s current minimum wage is $8.25 per hour. As of July 1, 2016, Chicago’s minimum wage is $10.50 per hour. If you live in Chicago, your wage cannot be lower than $10.50. Outside of Chicago it is $8.25.
If FLSA applies to you, then you are labeled “non-exempt”. If it does not apply to you, then you are labeled “exempt”. A non-exempt employee gets all the benefits of FLSA. A few of the benefits are overtime and a minimum wage. An exempt employee gets no benefits of the FLSA. As an employer, you want all your employees to be exempt. As an employee, you want to be non-exempt.
The law was updated once since the 70’s. This was in 2004 to increase the hourly rate. The new rules do not change job descriptions for exempt employees. It changes the minimum income you need to be exempt. The easiest way to determine if an employee is non-exempt is their wages. If they are below the standard amount, they automatically get the benefits of FLSA. The current weekly wage to determine if an employee is exempt is $455 a week. On December 1, 2016, it increases to $913 a week. This is the same as $47,476 for a full-year worker. If you make $913 or less a week, you will be become a non-exempt employee on December 1, 2016. An employer can increase your income to over $913 per week. However, then the law requires the employer to determine what you do and if that is exempt. For example, certain professions are exempt, like doctors, dentists, pharmacists or administrative exemptions.
What does the increase in minimum income mean? If you were making $456 per week, you were not eligible for overtime. Currently, making more than $456 per week, you could work 50, 60, 70 or more hours per week and get straight time. On December 1, 2016, you will be getting paid over time.
Also, if you are a white collar worker, making over $100,000 you were not entitled to over time. On December 1, 2016 you would have to make more than $134,004 a year or you would be entitled to overtime. If you are making between 100,000 and 134,004 a year, an employer should calculate what your income will be with overtime and decide whether it is better to pay you 134,005 per year to keep you exempt. If you are a Highly Compensated Employee, then 10 percent of the salary threshold are met by non-discretionary bonuses, incentive pay, or commissions.
The threshold for determine if an employee is exempt will be adjusted every three years. This will start in 2020.
The changes are substantial, which prevented me from covering all of the changes here.
If you think you or your company needs more information, please feel free to contact me at Info@JeffJacobsonLaw.com, 331-222-9529 or visit my website at www.JeffJacobsonLaw.com.