The Fair Labor Standards Act (FLSA) has changed the overtime rules for certain salaried workers, which will be applicable to Michigan employers. The changes are to be implemented on December 1, 2016. Michigan business owners need to start planning now in order to avoid scrambling in November.
Many Michigan closely held businesses classify salaried employees as being exempt from the overtime rules as a means of controlling payroll costs. An exempt employee is an employee who is, 1) paid a salary; 2) the salary is equal to the minimum amount (see discussion below); and 3) their job duties primarily involve executive, administrative or professional duties or outside sales.
Number 2 above is what has been changed with the new FLSA overtime rules. Prior to December salaried employees are exempt from paid overtime if their annual salaries are a minimum of $23,660. Effective in December, the annual salary must be $47,476 or more or $913 per week.
Michigan employers will be required to comply with these rules. Michigan small businesses already have to comply with the Affordable Care Act, and increased state minimum wages, and this change could cost employers more. For business planning purposes, the employer needs to review the pay and the hours worked by their exempt employees. After this analysis, if there are exempt salaried employees who are not paid the minimum annual salary, the employer can, 1) increase the salary of its exempt employees to the new level; 2) reclassify exempt employees to hourly employees and then restrict their overtime hours and overtime pay; or 3) start counting and controlling the hours exempt salaried exempt employees work.
Note that these change do not impact hourly employees who will still be paid 1.5 hourly rate for hours worked in excess of 40 hours in any single week.
Christopher G. Schultz is a partner in our Livonia office where he concentrates his practice on representing businesses in many areas of the law. Additionally, he assists clients with estate and elder law planning. He may be reached at (734) 261-2400 or firstname.lastname@example.org.