It’s a Good Time to Review Your FLSA Preparations
Virtually every construction payroll is governed by the Fair Labor Standards Act (the “FLSA”) and has been since 1938. The FLSA governs payment of a minimum wage, overtime pay for time worked over 40 hours in a workweek, restrictions on the employment of children, and recordkeeping. This Act has been amended on many occasions and new changes are set to take effect on December 1, 2016. Much of the discussion during the regulatory comment period has centered around increases in the minimum salary threshold required for exempt status (meaning the employee is exempt from overtime pay requirements), but there are other compliance considerations to keep in mind.
While the upcoming amendments are intended to update the salary thresholds, I believe that the Department of Labor is also gearing up to restrict the number of employees who can be considered exempt through more rigorous enforcement of the “duty” tests which apply for administrative and executive employees. Keep in mind that exempt status depends not only upon the employee’s salary, but also on the employee performing a “duty.”
For the construction industry, this issue arises most frequently in the context of job site superintendents and foremen. These employees are frequently expected to work more than 40 hours per week. The question is whether or not they are entitled to overtime.
Generally speaking, after December 1st, in order to be considered exempt these employees will have to receive a guaranteed weekly salary equal to 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 time worker. They must also pass a “duties” test.
In construction, the most frequently used exempt categories tend to be the ones which apply to administrative and executive employees. To be considered administrative, an employee’s primary duty must involve exercising discretion and judgment over matters of importance to the employer. To be considered executive, an employee’s primary duty must involve managing the organization or a subdivision thereof and the employee must be responsible for managing at the equivalent of at least two full time employees. (Note – in most cases, subcontractors and independent contractors do not count for purposes of the management test.)
In light of the above, this a great time to audit your employment practices and plan for the future regulatory environment. Without a doubt, this is a complex area of law that can have a significant impact on your bottom line. For that reason, we work with a number of employment law firms and do not hesitate to point our clients in their direction when needed. The US Department of Labor also offers valuable information on their website.