On May 18, 2016, the Department of Labor announced that it is publishing the “Final Rule” as an update to the wage and hour division regulations, which governs the exemption of “executive, administrative, and professional” (“EAP”) employees from the minimum wage and overtime pay protections of the Fair Labor Standards Act (“FLSA” or “Act”).”1
“This Final Rule updates the salary level required for exemption to ensure that the FLSA’s intended overtime protections are fully implemented, and to simplify the identification of overtime-protected employees, thus making the EAP exemption easier for employers and workers to understand and apply.”1
What does this entail? The following provisions come directly from the Department of Labor Wage and Hour Division. 1
Key Provisions of the Final Rule
The Final Rule focuses primarily on updating the salary and compensation levels needed for EAP workers to be exempt. Specifically, the Final Rule:
- Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South, which is $913 per week or $47,476 annually for a full-year worker;
- Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally, which is $134,004; and
- Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.
How to adjust to these changes in WorkBook
With the new addition of the Final Rule, timesheets should be adjusted for non-exempt workers to include a non-billable “break-time” job in which employees can put in their time for various breaks. (It’s important to note that the billable/non-billable status of a time entry has nothing to do with what occurs in finance and administration. In finance and administration, it is the job billable status that has an effect on whether to bill or not to bill a time registration.)
Additionally, it is extremely important that employers maintain the correct capacity profile for each affected employee.
How do you do this? It’s easy. Employers simply have to navigate to the capacity profile for each employee underneath “Employee settings” and change the ideal and basic time appropriately.
For example, say a certain position can account for 8 hours of the day without calling out a break. If those are 8 straight working hours, then employers will want to include another hour (or half hour, however much time they’re allowed) to an employee’s basic time so the ideal booking is 8, and the basic time is 9. This will not change how many hours the individual can be booked on with regards to tasks, but they’ll have an extra hour that they will need to allocate to for their “break” time.
The final rule will become effective on December 1, 2016.
1 “Wage and Hour Division.” Fact Sheet: Final Rule to Update the Regulations Defining and Delimiting the Exemption for Executive, Administrative, and Professional Employees. United States Department of Labor, May 2016. Web. 26 Sept. 2016.