Business Guidance / Insurance Protection

What the FLSA Changes Mean For Your Business

Let’s start with some basics for those of you who may not be familiar with the Fair Labor Standards Act (FLSA). This law has many components that can be bucketed into five categories.

First, the law covers Minimum Wage which as of July of 2009 is $7.25. Some states have their own minimum wage laws and employees are entitled to be paid at the higher rate.

The FLSA also covers overtime and regulates how and when businesses must pay their employees for overtime hours worked.

The FLSA defines “hours worked” so employers know when they are or are not obligated to pay their employees.

The law also creates record keeping requirements. This determines the postings and notifications that employers must provide to their employees as well as guidelines for maintaining wage and pay records.

Finally, the FLSA covers the subject of child labor for the protection of minors.

This December, FLSA changes will go into effect.

These changes are related to the overtime section of the law, specifically who is and who is not eligible for overtime pay. “Exempt” is the term used for those positions that are NOT eligible for overtime. “Non-exempt” is the term used for those positions that ARE eligible for overtime.

There are three tests used to define who is exempt and who is non-exempt. For a business to deem a position as exempt, meaning NOT eligible for overtime, the position must:

  1. Be paid on a salary basis and not paid by the hour.
  2. The duties of the position must meet certain criteria (executive, professional, administrative, computer or outside sales).
  3. The compensation rate must meet a minimum salary threshold. Today, to be considered non-exempt an employee only needs to earn $23,660 per year. In December, this annual salary threshold goes up to $47,476. This is almost a 50% increase, so for small businesses this could have a significant impact.

So what can you do to prepare?

  • Review your job descriptions to ensure they are thorough and accurate.
  • Review the duties test requirements to ensure the classification you assigned to each position is in line with how the Department of Labor defines exempt and non-exempt based on the duties and responsibilities of each position.
  • Review current incumbent salaries. If you have an exempt employee below the new threshold you have two choices: 1) increase the employee’s salary or 2) classify the employee as non-exempt which would entitle them to overtime pay.

Obviously there is a lot of detailed work that needs to go into FLSA compliance. If you need support to ensure you are compliant by this December, Univest HR Consulting can help.  Please feel free to contact us at (484) 391.2131 or insurance@univest.net.

Insurance products offered through Univest Insurance, Inc., a licensed insurance agency affiliate of Univest Corporation, are obligations of and underwritten by unaffiliated insurance companies. They are not insured by the FDIC or any other agency of the United States and are not deposits of or guaranteed by any bank.


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