One of my favorite topics is the FLSA. I seem to have gravitated to this through my short five year career in Human Resources. I recall my first job where I would have to clock in and out a lot and to work no more than 40 hours because of my age. I used to think the Clubhouse was weird for doing this; however, I later learned it was federally mandated. It did not really make much sense to me of the impact the laws have on people everyday until I became an HR professional.
The topic of discussion today is the Department of Labors proposed Overtime rule for exempt employees. Many are starting to hear about the proposed rules and how it can impact them. The public comment period for the proposed bill will close as of September 4th, 2015. Many employers are probably holding onto their seats to decide how they will handle the changes when they go into effect. Any type of increase in wages will absolutely take a hit to budgets; especially if not planned. Let’s explore some of the historical numbers associated with the FLSA.
The current FLSA rule states an employee must meet both a duties test and a minimum salary in order to be considered Exempt from the rules of overtime.The duties test is applied by looking at the type of work being performed. Some of the common types of exemptions are found in Administrative, Professional, Outside Sales, Highly Compensated, Executive and IT professionals. These individuals must all perform a great deal of independent discretion throughout their job, or supervise employees (discipline, schedule or terminate). My definitely of independent discretion is making a call on an issue when someone else is not there. Not many employees have this power, and it is definitely not one to take lightly.
The current minimum salary of $455 per week (or $23,660.00 annually) must be paid to employees who are exempt from overtime. The hourly wage (40 hours times 52 weeks=2080 hours) equates to $11.375 per hour (higher than Louisiana Minimum Wage). After researching the minimum wages by state, Washington D.C. leads the pack with a whopping $10.50 per hour. Interestingly enough, Washington D.C’s minimum wage will increase again to $11.50 per hour on July 1st, 2016. Many states pay the minimum wage mandated by the federal government; however, there are some states who pay a higher wage because cost of living is much higher in those areas. The law says a State and employers can pay the federal minimum wage or higher if they so please. However; the state and employers may *not* pay below the federal minimum wage. If an employer pays below the minimum wage, they can expect to see some type of lawsuit (possibly class action) for violating the minimum wage laws.
The new proposal hopes to increase the weekly minimum wage for exempt employees to $970 per week, or $50,440 per year. This increases the hourly wage to $24.25 per hour. I know my first boss at the golf course would definitely benefit from this wage increase since she probably makes $40,000 a year working 60-70 hours a week. On the flip side, the golf course is going to have to most likely require her to work fewer hours (40 exactly) or pay her overtime for every hour over forty. The golf course is going to have to find a way to operate without her there every hour they’re open. I’m happy because she can probably take more time for herself at home with her family.
This is just one of the many examples of how a person could benefit. Most organizations will probably end up having to re-evaluate their job descriptions and making these exempt individuals non-exempt and keep their wage the same. The only way they could control the wages from getting out of control is to ensure these employees are only working 40 hours. Once finished, they will most likely need to hire per diem or part-time employees to fill the gaps. If anything, this may create more jobs if the companies follow this type of structure; which in turn can decrease the unemployment rate.
I can only hope this change benefits employees more in the end (as well as employers). The worst thing which can happen is employers decide to replace workers with machines in checkout lines and other facilities. We see evidence of it slightly at Wal-Mart and Winn-Dixie already, I can only hope in the end more jobs are created and more people live a better life due to higher wages.
What are your thoughts on the issue? Are you for or against the proposed changes in the FLSA exemption rule?