Rules for Exempt and Non-Exempt Employees

As the hiring experts, we’ve kept our customers informed about government regulations pertaining to hiring, including the rules for exempt and non-exempt employees, for many years. Recently, we alerted you to a pending amendment to the Fair Labor Standards Act (FLSA) that affects every business with an annual gross volume of sales of $500,000 or more. These new rules for exempt and non-exempt employees could possibly change the way you classify and compensate some of your employees. In May, the U.S. Department of Labor (DOL) announced that the new threshold salary for the exemption of white collar employees will be $913 per week, or $47,476 per year, as of December 1, 2016.

The threshold, which was previously $455 ($23,660), had not been updated for 12 years. That will never happen again, because the new plan is to update the threshold every 3 years. The DOL intends to maintain it a level equivalent to the 40^th percentile of earnings of full-time salaried workers in the lowest-wage Census Region.

Be aware that just giving employees a great title will not qualify them as exempt from being paid overtime, cautions ThinkHR.com. The new rule also makes it easier to identify which employees are actually eligible for exemption. If you currently have employees who are classified as exempt and earning less than $47,476, here are the basic parameters:

In addition to the earnings threshold requirement, white collar employees must be paid on a fixed salary basis regardless of quality or quantity of work performed. Their key duties must be executive, administrative, or professional, according to the DOL’s specifications. (Doctors, teachers, lawyers, and most outside sales professionals are excluded from the salaried and threshold requirements.) For more on what makes your employees exempt or not, read our previous post on what makes an employee exempt.

If raising your exempt employees’ salaries to meet the threshold is not in your budget, you will need to reclassify them as nonexempt and either start paying them overtime or eliminate the unpaid hours they’re currently working. Either way, you’ll need to think through new guidelines for hourly reporting and overtime restrictions. This may also require analyzing your benefits and paid time off structures and developing a communication plan so employees understand why the changes are being made.

Undoubtedly, this quick overview will leave you with a few questions, which we’re happy to help you address. However, we don’t profess to be legal professionals, so for a more thorough explanation of the implications of this issue for your organization, please read ThinkHR.com’s thorough post on the subject. 

Do you want to acquire top professionals? Amtec can help you find the best people by actively marketing your job opportunities, connecting you to passive job seekers, and assisting with offer negotiations. Click here or call (714) 993-1900 to get your search started.