The U.S. Department of Labor released the final new rules on Fair Labor Standards Act (FLSA)* overtime standards this week. While HR professionals have been talking about this behind closed doors for about a year now, there wasn’t much public buzz about it … until now; it’s making a much more public splash on the Today Show and NPR, to name a few. But what is this law, how does it work, and how does it impact you?
(Photo Credit: Farin Sadiq/Flickr)
Quick rundown of the FLSA and “exemption status”
There is a set of laws that protects workers by providing meal and rest breaks as well as overtime pay for hours worked beyond a designated amount. These laws are called the Fair Labor Standards Act (FLSA). Your job either has to follow those rules (which makes you not exempt from them, or non-exempt), or it doesn’t have to follow those rules (which makes you exempt). If you struggle with double-negatives, like I do, it’s sometimes hard to remember which term means what. Ultimately it’s about whether the rules apply to you or not.
There are two groups of information that go into identifying whether you’re exempt or not. The first is a set of exemption tests based on the job. Frankly, those tests are fairly complex and often require the services of an employment lawyer to fully define. The second requirement is that employees meet a minimum weekly salary.
What are the changes?
- The biggest change is that in the new ruling announced May 18, 2016, the minimum salary was raised to $913 weekly ($47,476 annually), which is more than twice what the minimum salary used to be. The impact of this change is while your jobs may qualify as exempt by passing the exemption tests, *you* may not qualify as exempt because your salary doesn’t hit the minimum threshold.
- The next change is that the minimum salary will be evaluated every three years. That’s good for employees because it means that the minimum salary will rise as cost of living rises.
- The changes go into effect December 1, 2016, in a little over six months. By that date, your company will have to follow the new rules.
How will the changes impact me personally?
The ruling only impacts employees who are currently in exempt jobs and whose pay falls between $23,660 and $47,476 annually. Organizations basically have two options in order to comply with the new ruling.
They can convert the employee from being “exempt” to being “non-exempt”:
- If this happens to you, you’ll be able to earn overtime! Hurray! Of course that will only happen if your organization’s policy allows overtime work to happen, and your boss doesn’t start chasing you out the door when you hit the end of your allotted hours for the day or week (depending on which state you work in).
- You’ll be entitled to meal breaks and rest breaks in the middle of your workday. In fact, you’re technically required to take meal breaks and rest breaks in the middle of your workday. If you’re the type of person who loses focus after a break, like me, this may prove a bit of a challenge. Some organizations and some managers stick more to the letter of the law than the spirit of the law. This will be one of those times where you’ll get to know a lot about the culture of your organization.
- There is a notion that “non-exempt” workers have a lower organizational position or status than “exempt” workers. The fact that the minimum salary is being raised so dramatically (more than doubled) is a good thing. It has the opportunity to start changing the notion of what earns status in organizations. Status should be earned by the demonstrated results that you achieve. Use this opportunity as a chance to turn the tides a little.
- A note on moving to non-exempt: it’s usually a learning process for both employee and manager. If you want to get on your manager’s good side, now is a good time to consider cutting them a little slack as they learn the ins and outs.
Organizations can raise pay to at least $47,476 and maintain the status of “exempt”:
- No changes to meal or rest breaks. You’re still not eligible for overtime. That may be a bummer if you’re close to the cut-off mark for exemption status, but take some time to think about the other benefits you get from working at your organization. If you come up empty in your thinking, it may be time to start looking. Compensation is only one piece of the puzzle; others include the ability to do meaningful work, room for advancement, decent benefits, and perks that are actually interesting to you.
- If they raise your pay, that may put you pretty close in pay to either someone who supervises you, or someone you supervise. There are a lot of moving pieces for your HR folks to consider. They may not have realized that your pay was close to that of your supervisor or report. If it’s too close for comfort, bring it up with your manager or HR. Have an open conversation about both your pay and other things that make you happy to work for your employer.
Anything else I should know?
- There has been some controversy about this ruling. There are questions about whether this change will create costs that will be hard for non-profits and small businesses to absorb. For some good reading about the impact of the ruling, SHRM has put together a resource center. It’s definitely worth poking around.
- Also, you may be curious about whether it’s better for you to ask to be kept exempt and paid a higher base salary, or switched to non-exempt and be eligible for overtime. ADP has put together a calculator to help figure out the answer. It’s aimed at companies, but works just fine for individuals.
Finally, change can be tough on everyone – HR, managers, and you. That said, it can also be just that opportunity you needed to have a conversation about what it takes to get to the next level. Take every opportunity you can.
* The information provided is for informational purposes only. Although every reasonable effort is made to present current and accurate information, PayScale makes no guarantees of any kind and cannot be held liable for any outdated or incorrect information. Ultimately, employment lawyers can help navigate murky compliance waters.