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FLSA Overtime Rule Change

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Katie Swanson

on 29 November 2016

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Transcript of FLSA Overtime Rule Change

FLSA Overtime Rule Changes
Wilson Toellner CPA
Rule change
Asking Questions
This product is intended to serve solely as an aid for this presentation. Due to the constantly changing nature of the subject of the materials, this product is not appropriate to serve as the sole resource for any accounting opinion or return position, and must be supplemented for such purposes with other current authoritative materials. The information in this presentation has been carefully compiled from sources believed to be reliable, but its accuracy is not guaranteed.
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What is the Fair Labor Standards Act (FLSA or Act)

What Changed

3 Tests For Exemption

Common Misunderstandings

Options Available to Comply

Fair Labor Standards Act (FLSA)
Guarantees a minimum wage for all hours worked.

Guarantees overtime pay of one and one-half times the employee's regular pay for hours worked over 40 hours.

There are exemptions from the minimum wage and overtime requirements.
Example: Commission
Example: Bonus
Example: Bonus
3 Tests for Exemption
Catch Up Payments
Must pay 90% of standard salary level each pay period

Employer has one pay period at the end of the quarter to make up for any shortfall (up to 10% of the standard salary level).
Salary basis test:
Employee paid a predetermined fixed salary that is not decreased because of changes in amount of work or performance
Salary level test:
Compensation must total $47,476 annually
Duties test (NO CHANGE):
Primary work must involve executive, administrative, or professional duties, or in the capacity of outside salesman
FALSE: Non-exempt employees are not required to be paid hourly and can be paid a salary
overtime pay is required if more than 40 hours worked in a week
"White Collar" employees who meet all 3 tests are exempt from minimum wage and overtime pay protection.
FALSE: Salary employees are disqualified from receiving over-time pay
non-exempt employees must be paid over-time regardless of salary or hourly pay
Effective Date
Options Available to Comply
FALSE: Final rule does not apply to higher education employers, not for profits, governmental and small businesses
Rule does apply to higher education employers, not for profits, governmental and small businesses

FALSE: Employers are not required to keep detailed records of hours worked by non-exempt workers
Employers should keep records for each non-exempt employee
Increase exempt salary to meet the minimum $47,476

Reclassify as non-exempt and overtime eligible and pay overtime

Adjust hourly rate to account for anticipated overtime

Don't set rate by dividing current salary by 40 hours per week

Options Available to Comply
Reduce pay for non-exempt employees or provide slower and smaller wage increases

Delay promotions

Reduce hours to avoid overtime and shift work to other employees

Hire more part-time employees
-Take a 60 hour job and make it two 30 hour jobs without overtime

Recording time

Loss of flexibility

Loss of steady income - wages may fluctuate

Employee morale
punching hours = psychological demotion

Overtime estimates not reliable because no past history

Potential for significant increase in costs

May require hiring more workers
Overcoming Challenges
Conduct an analysis of increased costs to successfully implement a new plan.

Make business leaner and find efficiencies to result in employees completing job in 40 hours a week.

Reduce fringe benefits to make up cost difference.

Public (governmental) employers offer comp time. This is NOT an option for private employers.

Have open dialogue with employees so they are informed and know what to expect.
What's New
The latest developments
We welcome and encourage your questions.

You are invited to address questions with a Wilson Toellner team member privately at this time.
Exempt Executive Job Duties
Regularly supervises 2 or more other employees

Has management as primary duty

Has input into job status of other employees (hiring, firing, promotions or assignments)
Exempt Administrative Job Duties
Office non-manual work

Directly related to management or general business operation

Exercise of independent judgment and discretion about matters of significance

Exempt Professional Job Duties
Traditional "learned professionals"
Lawyer, dentist, teacher, architect, clergy, RN (not LPN), accountants (not bookkeepers), engineers (degree or equivalent and perform that type of work), actuaries, scientists (but not technicians), pharmacist

"Creative professional"
Actor, musicians, composers, writers, cartoonist, and some journalists
Exempt Employees
The following employees are exempt regardless of their salary

Licensed or certified doctors



Outside Sales
Primary duty is making sales, or obtaining orders or contracts for services or for the use of facilities

Regularly work away from employer's place of business
Common Mistakes
Timekeeping Best Practice
List of items to keep:
Time and day of week when employee's workweek begins

Hours worked each day

Total hours worked each workweek

Basis on which wages are paid (per hours, per week, etc)

Regular hourly pay rate

Total daily or weekly straight-time earnings

Total overtime earnings for the workweek
Timekeeping Best Practice
No particular form or order of records required

Employers choose how to record hours worked for overtime-eligible employees

Can be low cost

Each employee sign off on their own time sheet

Have a supervisor or manager approve each time sheet
How do you comply?

What happens if you don't comply?
Penalties for
May be responsible for paying back wages

Two year investigation period

Willful violations increase to three year period

As well as additional amounts in damages, civil penalties and/or attorney fees

Willful violators may be prosecuted criminally and fined up to $10,000

Second conviction may result in imprisonment

Civil money penalties of up to $1,100 per violation

FALSE: Changes rules relating to payment of non-exempt employees
Non-exempt employees are and will still be entitled to OT pay. Salary level has changed for exempt employee to remain exempt or move to non-exempt and receive OT pay
The overtime rule was blocked by the US District Court on November 22, 2016. The overtime rule will not be effective December 1, 2016. Employers may continue to follow the existing overtime regulations.
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