DOL ….. FLSA…… EAP……. Wait! What?
Are you confused? Don’t worry, you aren’t alone! Many of us are confounded by all the acronyms currently flying around since the White House Press Secretary’s press release on the impending new rules on overtime last Tuesday, May 17th. While the brief in question droned on about how these changes to overtime regulations will benefit American workers after December 1, 2016, not a word was stated about the impact of these changes to business owners. And yes, there will be an impact to the funeral industry. So what is going on?
The Fair Labor Standards Act (FLSA) was lasted updated in 2004. It established three tests that must be met for an employee to be exempt from overtime under the definitions for Executive, Administrative and Professional employees (frequently referred to as EAP). The test is:
1) The salary basis test which states that employees must be paid a predetermined, fixed salary regardless of the quality or quantity of the work performed by the employee,
2) The salary level test which requires that the base pay of an employee must meet a minimum set amount, and
3) The duties test whereby employees must be performing specific duties as part of their regular daily work as identified within the specific EAP categories.
Effective December 1, 2016 the salary level test will change in several ways. Based on the new Final Rule issued by the Department of Labor (DOL) the minimum salary level will increase to $47,476 which is more than double is current level of $23,660. Also, employers will now be able to include nondiscretionary bonuses and other incentive payments including commission in calculating the salary level as long as it does not exceed 10% of the employee’s total salary.
In addition, DOL raised the salary of Highly Compensated Employees (HCE) from $115,000 to $134,004. HCE are deemed exempt from overtime if the following is true:
1) The employee makes the minimum stated compensation,
2) Their primary duty includes performing office or non-manual work, and
3) They regularly perform at least one of the exempt duties from the EAP categories.
And finally, the DOL has established a mechanism for updating these standards every 3 years. At this time, no change was made to the salary basis test or the duties test.
So what does this mean for funeral home owners and managers? Before December 1, 2016 review the compensation offered to your employees that you currently treat as exempt from overtime. Make sure that under the revised rules these employees will continue to qualify for exempt status.
Remember, the increase in the salary level established by the DOL is not adjusted for those who operate a business in rural or suburban areas which may have much lower wage rates than larger cities. During the review employers will want to make sure they are considering nondiscretionary bonuses and other incentive forms of compensation that may now be included in this calculation.
Owners and managers should review those who are currently identified as a HCE and exempt from overtime. With the increase in the salary from $115,000 to $134,004 they may no longer meet the criteria for exempt status. Adjusting for these salary level increases may significantly impact your budget in the forthcoming year.
In the future, this review will need to be done every 3 years as the mechanism established to update these criteria will automatically begin in 2019. The Foresight Companies Foresight has been and continues to be at the forefront of Human Resources consulting for funeral homes and cemeteries throughout the United States. We stand ready to assist owners and managers as they deal with these changes to the overtime rules and any other Human Resource matters you may have.
About the Author: Stephanie Ramsey is the HR Specialist for The Foresight Companies, LLC. She has managed small staffs and those with over 200 employees with more than 25 supervisors directly reporting to her. She has run an 800 call regional combination business. She has a unique perspective on the challenges funeral and cemetery business owners and managers face when dealing with employee issues. Stephanie combines her hands on employee management experience with her knowledge of various industries to develop workable human resource structures within any size business. She has written many Employee Handbooks and other job specific documents for clients nationwide. In addition to speaking at national conferences, Stephanie writes a quarterly newsletter on HR matters that can be viewed at www.f4sight.com. She can be reached at [email protected].