24 FEATURE
Understanding and Preparing for the New FLSA Salary Rules – Effective December 1 , 2016
BY BETH CARROL , PROSPERIO GROUP
First , don ’ t panic . While the change is dramatic , the issue is fundamentally a math problem with a heavy dose of human psychology thrown in for good measure .
BACKGROUND
To manage through a change , it ’ s good to first understand the history and the players . The federal government sets the minimum wage and overtime rules for ALL employers who generate more than $ 500k in annual revenue / sales in ALL states through the FLSA ( Fair Labor Standards Act ). Note that a state can be more favorable to employees but not less favorable than the feds ; home rule states are not exempt from this requirement . The FLSA has had ( for a very long time ) a two level check system to determine if overtime must be paid :
Check # 1 : The minimum salary required to consider a position EXEMPT from overtime ( no overtime required ) was $ 455 a week ($ 23,660 a year ) and has been for many years
Check # 2 : The duties test that looks at the actual job description and determines if the position falls under one of the defined exemptions
( Executive , Administrative , Learned Professional , Outside Sales , Motor Carrier Exemption , Retail Sales , etc .)
If an employee ’ s salary failed # 1 , # 2 didn ’ t really matter – you must pay overtime ( except for Outside Sales – it ’ s ok for them to have salary less than the minimum ( or no salary )).
THE REASON FOR THE CHANGE
The salary level had been at $ 23,660 ($ 11.38 per hour ) since 2004 and was starting to fall behind and would soon be eclipsed by minimum wage in many places ( a minimum wage of $ 15 per hour is $ 31,200 / year ). The
Customized Logistics and Delivery Association | Fall 2016