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Sarah Belliveau, CPA

Labor Law Changes May Have an Impact on Your Bottom Line


Beginning in 2016, employers are expected to face an expansion to overtime compensation rules in the workplace. For the first time in more than a decade, proposed rule changes set forth by the Fair Labor Standards Act (FLSA) would redefine the wage base for exempt employees. This shift may require employers to closely examine job descriptions and employee classification for employees earning up to $50,440 a year.

The facts

Under the current law, employees earning less than $455 a week or $23,660 annually working more than 40 hours a week are entitled to overtime pay, unless they are considered an exempt employee. But what qualifies an employee for exemption under the current law?

  • Earning more than $455 per week or $23,660 annually on a salary basis, and
  • Performing exempt work, including executive, professional, or administrative duties

An employee may also qualify for exemption by holding a job regulated by another federal labor law or performing a job specifically treated as exempt, i.e. many agricultural jobs

Looking ahead

Once the final rule is issued, it is anticipated that employees will need to earn a minimum of $970 per week, or $50,440 annually in order to qualify for exemption, which would more than double the current overtime pay wage cap. This amount will likely also be tied to wage growth and subject to periodic increases.

Gain control: what to consider

There is no easy way to identify exempt employees. Managerial positions are particularly difficult to classify. Because tracking hours for remote workers can pose a challenge, the Department of Labor plans to propose regulation on best practices to track hours for nonexempt employees who work remotely. As the rule changes draw closer, we encourage you to review your organization’s exempt employees to determine whether they are performing duties that would make them eligible for overtime. Our CPAs can help you address the potential financial impact of the changes and their potential impact on your business.

Exempt Employee Wage Floor

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