The highly anticipated Final Rule change to the salary basis threshold goes into effect December 1, 2016. Most employers are focused on analyzing compensation data to determine whether it would be advantageous to adjust pay to meet the new threshold and retain the exempt status for those employees close to the mark. However, that may be a short-term view with potentially longer-reaching implications, as it could lead to pay compression throughout the entire salary structure. Similar to throwing a stone in a puddle, the ripples could mean additional adjustments deeper into the organization making for a greater expense than perhaps initially calculated.
The Final Rule does not change the duties test for exempt employees, a potential blind spot for those who do not ensure both salary and duties meet the requirements of the regulations, as exemption is not an “either/or” but a “both/and” determination. Misunderstanding what actually qualifies an employee as exempt is common and could cost an organization considerably in the form of back wages, overtime, penalties, and, in some cases, attorney fees.
MSEC offers a wide variety of services to help members navigate the requirements of the FLSA and identify strategies based on the business needs of their organizations.