FLSA - New Federal Rule on Overtime Goes into Effect on December 1
Does your community have employees? If the answer is yes, you need to know about changes to the Fair Labor Standards Act (FLSA) regulations that go into effect on December 1, 2016. They may affect your budget and how you do business.
The FLSA is a federal law that governs, among other things, the payment of minimum wage and overtime compensation. The upcoming changes focus on the definition of exempt employees under the FLSA – those employees who are not entitled to minimum wage or overtime under the FLSA. Many exempt associates work on-site at managed properties and provide property management services.
Changes to the FLSA
The federal Department of Labor recently revised its regulations and increased the minimum salary threshold for white collar exempt employees from $455 per workweek ($23,660 per year) to $913 per workweek ($47,476 per year). That means that most associates classified as exempt from overtime will have to be paid at least $913 per workweek, without regard to the number of hours worked in a workweek. The new salary baseline goes into effect on December 1, 2016, and will increase automatically every three years beginning in January, 2020. In some states, the minimum salary test may increase even higher than federal, so be sure to check with your association’s attorney if you have any questions. If the employee is not being paid at least $913 per workweek, then they need to be reclassified as non-exempt, record their hours, and be paid time and one-half their regular rate when they work more than 40 hours in any workweek. Increasing the threshold results in a far greater number of people in the U.S. becoming eligible for overtime.
What Your Community Must Do
Your community has two basic options to address employees who currently are classified as exempt from overtime but paid less than $913 per workweek: you can either increase the salary to at least $913 per workweek, or you can reclassify the employee as non-exempt, track his/her hours, and pay overtime when worked. Either way, your association could see a significant increase in costs, and it’s not quite that simple a choice to make.
The U.S. Bureau of Labor Statistics reports that the median community association manager salary is $55,380 per year. That means that half of community association managers make more than that amount, and half make less. So a significant number of community association managers make less than the new salary threshold for the overtime exemption. If you wish to keep them as exempt, you will have to increase their salary to at least $913 per workweek.
How to Find Out More
Ask your property management company how it is addressing the new overtime rules. If you are self-managed, talk to your association attorney or an employment attorney. At FirstService Residential, we have been proactive in our efforts to comply with the changing laws.
Starting in 2015, and through 2016, FirstService Residential implemented a new payroll and time keeping system to ensure that associates’ time is being tracked properly and that they are being compensated in accordance with Department of Labor standards. Over the last several months, FirstService Residential has conducted an impact analysis to assess complying with the new regulations and state law considerations.
The information listed below is a brief overview of the Fair Labor Standards Act (FLSA) for informational purposes and is not intended to serve as legal advice.
Federal and State Law Requires Overtime Pay for Non-Exempt Associates
The Fair Labor Standards Act ("FLSA") is a federal law that requires, among other things, covered employers to pay associates overtime, at time and one-half their regular rate, for hours worked over 40 in a workweek. Some states have laws that go beyond the federal FLSA and require employers to pay overtime in additional circumstances. Associates who are entitled to receive overtime compensation under the FLSA and state law are called "non-exempt" associates. An associate cannot be classified as exempt from overtime unless s/he meets a "duties test" and a "salary test" under both federal and state law.
Exempt Associates Are Not Entitled To Overtime Pay
Under the FLSA, certain categories of associates, called "exempt" associates, are not entitled to receive overtime, even if they work more than 40 hours in a workweek. To qualify for an exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis. The current FLSA changes relate to the salary basis test, but there is also the possibility of changes in the future to the duties test under the FLSA. The FLSA has several categories of overtime exemptions. One category, white collar overtime exemptions, includes the Executive, Administrative and Professional exemptions. Other common exemptions under the FLSA include, but are not limited to, the Computer Employee exemption, the Highly Compensated exemption and the Outside Sales exemption. There are additional exemptions under the FLSA and certain state laws.
For more information on how partnering with a quality property management company can help your community handle this and other labor issues and regulations, contact FirstService Residential today.
Fill out the form below to receive exclusive articles like this one and other property management educational resources straight to your inbox.