Will the New Fair Labor Standards Act Regulation Affect Your Business?

Christopher M. Joanis, MS, SPHR, SHRM-SCP (May, 2016)

The new regulation from the U.S. Department of Labor was unveiled by the President on May 18, 2016.  Overtime benefits will now be expanded to certain full-time, salaried employees who earn up to $47,476 per year.  The current threshold is $23,660.  This pay increase might impact as many as 4.2 million workers when it goes into effect December 1, 2016.

The question of whether or not this regulation applies to your business often has a complicated answer, and depends on where your employees perform their duties, the nature of your business’s revenues, and the work that individual employees perform.  The following needs to be considered:

  1. Coverage Through State Law: New York is currently one of 11 states where changes to the federal rules will automatically apply to practically all employees and employers.  This is because New York expressly incorporates by reference the Fair Labor Standards Act (FLSA) regulations into state law by way of statute, regulation, or administrative ruling.
  2. Enterprise Coverage: For businesses that operate outside those 11 states, the FLSA applies if their annual business/sales revenues are at least $500,000.
  3. Individual Coverage: For businesses that operate outside those 11 states and do not meet the above standard for enterprise coverage, you might still have employees covered by the FLSA if they engage in interstate commerce or in the production of goods and services for interstate commerce.  Employees who handle credit card transactions or order goods from out-of-state suppliers are probably covered by the new regulation.

It is important to note there are basic requirements for claiming a white collar exemption for certain executive, administrative, and professional employees.  With the exception of doctors, lawyers and teachers, salaries must meet the threshold of $47,476 for this exemption.  Employees must also pass the standard duties test regarding their “primary duty.”

Although the U.S. Department of Labor’s Wage and Hour Division provides many helpful resources regarding the new FLSA guidelines at https://www.dol.gov/whd/overtime/final2016/, you may want to review with a keen eye, as not all of the DOL’s resources have been updated to reflect the changes that will take effect on December 1, 2016.

For assistance on this and other topics related to your business, please reach out to your advisor at Dermody, Burke & Brown.