Photo by Lexi Coon.
Tony Cooper of Jimmie Hale Mission, who sponsored the luncheon, welcomes chamber members to The Club on Nov. 15.
On Nov. 15, members of the Homewood Chamber of Commerce gathered to discuss a topic that is on the forefront of many employers' and employees' minds: "The Final Rule," or the upcoming law that will provide overtime to millions of employees.
The new law goes by many names: the final rule, the 40-hour rule or the overtime rule. No matter what you call it, the law extends the qualifications to be eligible for overtime and reaches a broader expanse of employees. Passed in 1938, the original statement of the Fair Labor Standards Act, or the FLSA, set a minimum wage of $7.25 per hour and required overtime if an employee worked over 40 hours per week, said Michael Jackson of Wallace, Jordan, Ratliff and Brandt, LLC.
"The premise of the FLSA is if you work over 40 hours, you get paid overtime," he said, mentioning that there are certain employees who are exempt from this financial boost. Those in an administrative field, a professional field or an executive field, and who are also salaried, may be exempt from overtime payment if their annual salary exceeds $134,004. This new adjustment is equivalent with the 90th percentile of full-time salaried workers.
The number of workers who are not exempt, however, just grew immensely thanks to the new law. Previously set in 1975, hourly employees who made more than $23,660 per year, or $455 per week, were exempt from overtime pay. Now, only employees who earn more than $47,476 annually, or $913 per week, are exempt. "That's a 100 percent increase," said Jackson.
In addition to giving raises to adjust pay scales, there are three ways that employers can tailor their methods to accommodate the new law and potential overtime: make employees hourly, pay employees based on salary and use a fluctuating workweek or prohibit overtime work.
Under the premise that employees are paid hourly, they earn 1.5 times their hourly wage when working overtime. Fluctuating workweek employees tend to have a more complicated schedule and paycheck, and thus have an agreement with their employer that states a pre-determined yearly salary that can't be reduced, but their work hours must truly fluctuate above and below 40 hours per week.
Because many employees work on commission and not on a standard hourly wage or yearly salary, Jackson stated that the rules for those workers are not changing. Employee's earnings can include bonuses as well, but only if they make up 10 percent or less of the income and the bonuses are paid quarterly and on a non-discretionary basis.
"A lot of employers are looking at this and seeing that a lot of employees are mis-classified," said Jackson, mentioning again that the overtime compensation is dependent upon the worker's classification.
The new "40-hour rule" begins in less than a month on Dec. 1, which is a Thursday. "So if your workweek starts on something other than a Thursday, which is probably about 95 percent of businesses, then you may need to begin compliance at the beginning of the workweek that includes Dec. 1," said Jackson.
Currently, there are pending lawsuits challenging regulations, but if the results of those were going to affect the new law, Jackson believes they would have done so by now. "There is still a possibility, though," he said, adding that he doesn't expect this to be a big contender for change after the election. "I don't think this is on the front burner."