Understanding the December 1 Payroll Change

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Under the federal Fair Labor Standards Act (FLSA), employees must be paid at least the applicable minimum wage for all hours worked. In addition, employees must be paid overtime compensation for any hours worked over 40 during the workweek.
However, an employee who satisfies the requirements under one of the FLSA’s exemptions may be “exempt” from minimum wage and/or overtime compensation requirements. Conversely, any employee who does not satisfy an exemption is “nonexempt,” or not exempt from the entitlement to minimum wage and overtime compensation.
The changes effective Dec. 1 (the “final overtime rule change”) are specific to the FLSA’s “white collar” exemptions. The final rule did not change how employers must compensate nonexempt employees. In addition, the final rule’s main change is the more than doubling of the minimum salary threshold required under these exemptions.
Unless an employee currently classified as exempt under one of the white collar exemptions earns an annual salary that meets or exceeds $47,476 ($913/week) on Dec. 1, 2016, the employee must be reclassified as nonexempt.
Despite current efforts to delay the DOL’s final rule on changes to the white collar exemptions, employers should prepare to be in compliance for a Dec. 1 effective date.

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