How Will You Cope When the FLSA Changes?

Contractors around the country are worried. Regulatory changes to the Fair Labor Standards Act (FLSA) start in December, and contractors want to know if they will have to change the compensation of their salaried employees.

The answer to this is a resounding “maybe.” Some comp plans will certainly have to be examined – the most obvious being salaried workers in the field, particularly crew chiefs and field supervisors.

To decide whether you are in compliance, ask these questions for any employee who is not paid overtime:

How much do they earn?

The new minimum salary for any “exempt” employee will be $913 weekly, or $47,476 annually. This is pretty straight forward: Anyone making less than $47,476 must be paid overtime when they work more than 40 hours per week. In other words, lower paid employees cannot work overtime without extra compensation (they are “not exempt” from receiving overtime pay).

What do they do?

The FLSA “Duties Test” asks if the employee’s job duties are primarily manual labor (and not management). Any laborer must be paid overtime.  Restaurant workers, laboratory techs, and contractor crews all fall into this protected class.

Are they Executives?

The construction industry will have a particularly difficult time with this decision rule. While most field crews will fail one of the other tests, crew chiefs and supervisors could receive an “Executive Exemption”. To qualify as exempt from overtime, an “executive” must do the following:

  • regularly supervise two or more employees, and
  • have management as their primary duty, and
  • have input into the job status of others (such as hiring, firing, promotions, etc.)
[Note: Employees making more than $134,004 annually, must meet only ONE of the above 3 criteria to be exempt.]

Get into the Details

Whether or not an employee is an “executive” turns on a very thin distinction.

“It’s the difference between a team leader and a true manager,” explains independent HR consultant Valerie Edson. A “team leader” may be in charge, but contributes to the job in a manner that is equivalent to those that he supervises.  A manager may do some of the same work, but contributes “independent judgement and discretion on matters of significance,” she says.

Is your crew chief employed primarily for his good judgement and discretion? Or would you say that his primary role is helping the team with manual tasks? It’s really up to you.

Before you decide, however, keep in mind that if the DOL ultimately disagrees, you will have to pay back an amount equal to the prior two years of overtime wages for ALL similar employees. Worse yet, if you “willfully” misrepresented the employee’s exempt status, the penalty extends to three years and the risk of additional fines.

Write it Down

No matter how you read it, be sure to document the points you considered and build a written case for each worker’s status.  A memo alone may not convince the DOL that you correctly classified an employee, but it might help you avoid penalties for acting in “willful” disregard of the rules.

Still confused? This is complicated stuff: if you’re in doubt, seek the guidance of a legal or HR professional to protect both you and your workers.

David Worrell is a finance consultant, author and speaker with Fuse Financial Partners in Charlotte, N.C. Reach him at david@FuseFinancialPartners.com or 704-614-2701.

Copyright 2016, Knighthouse Publishing. Reprinted with permission.

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