George Reeves Breaks Down New Overtime Laws at Chamber Breakfast

November 9, 2016 | Posted By: Connor Watkins

Important information for business people was on the menu at the Greater Lexington Chamber’s monthly breakfast.

The Fair Labor Standards Act takes effect in less than a month, and George Reeves of Fisher & Phillips, LLP addressed those in attendance on that topic Tuesday morning.

The changes issued by the Department of Labor substantially increase the minimum salary requirement for certain exemptions. The new regulations will go into effect on December 1.

The FLSA requires payment of minimum wage and payment of overtime for hours worked over 40. There are also record keeping requirements. However, minimum wage and overtime requirements do not apply to exempt employees. In order to be considered exempt, employees must be paid a sufficient weekly salary and certain job duties must be performed.

The current salary level for white collar exemptions is $455 per week, which figures to $23,660 per year. The new salary level will be $913 per week or $47,476 annually. The change will mean that previously exempt employees who do not meet the new salary level are entitled to overtime for all hours worked over 40 in a work week.

For highly compensated employees, the salary level will increase from $100,000 per year to $134,000 annually.

“The government has changed the way you have to pay employees now,” Reeves said. “I believe one of the government’s goals is to get businesses to hire more people. You’re reducing unemployment, and that’s more people paying income tax and into social security.”

The salary level will automatically increase every three years with a notice of 150 days. The first increase will be in 2020. The increase will equal the 40th percentile of earnings of full-time employees in the lowest wage Census Region, which is the South.

“You can raise your salaries to maintain that exemption,” Reeves suggested. “Or the easy thing from a standpoint of compliance is convert them to an hourly employee and pay them hourly for their 40 hours and pay them time and a half for everything over that.”

What steps should a business owner take at this point?

According to Reeves’ presentation, first, analyze whether the requirements for the “white collar” exemptions you have been relying upon are met. Next, evaluate what might be changed about one or more jobs so that the incumbents may be treated as exempt in the future. You should also consider the possible application of alternative FLSA exemptions; and develop FLSA-compliant pay plans for employees who have been treated as exempt but who will no longer.

The breakfast was sponsored by Blue Cross Blue Shield and catered by Crescent Moon Restaurant.