New FLSA overtime requirements have deep impact on Hawaii employers

The new FLSA overtime rules raising the minimum guaranteed salary for the white collar exemption have finally been issued. An estimated 16,000 workers in Hawaii may be eligible for overtime.   In summary the final rule provides:
  • The annual salary threshold for exempt positions will jump from $23,660 to $47,476 (or from $455 to $913 per week), and will be updated every three years. Employees who earn less than the threshold must be paid for over 40 hours worked in a workweek-at a rate not less than time and one-half their regular hourly pay rate-even if they're classified as a manager, vice president, officer, or professional.
  • There will be no change in the duties test used to determine whether employees earning more than the salary threshold must be classified as nonexempt from overtime, including the exemptions for executive, administrative and professional positions, among others.
  • For highly compensated employees (HCEs), who may generally be considered exempt without regard to the duties test, the final rule raises the annual HCE salary threshold from $100,000 to $134,004.
  • The new rule takes effect on Dec. 1, 2016.
If you have not already done so, review all salaried exempt positions that are below the new $47,476 annual salary ($913 per week) and determine whether to raise salaries to the new level to maintain exempt status and avoid overtime and the legal duty to accurately record time worked on a daily basis.
The amount of overtime regularly worked and the paperwork burden will be your initial considerations, but the impact on morale and how raises could ripple through your workforce must also be considered.
Some workers may be upset to be treated as hourly workers despite the possibility of earning more pay in overtime.  Others may feel slighted if they don't receive the salary bump others receive to keep them exempt.
Businesses should also understand the possible impact on paid leave benefits that are based on compensation and how  increased pay may affect discrimination testing for employee benefit plans.
The Department is also changing the regulations to allow nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary test requirement. Such bonuses include, for example, nondiscretionary incentive bonuses tied to productivity or profitability (e.g., a bonus based on the specified percentage of the profits generated by a business in the prior quarter). The Department recognizes that some businesses pay significantly larger bonuses; where larger bonuses are paid, however, the amount attributable toward the white collar standard salary level is capped at 10 percent of the required salary amount.
For employers to credit nondiscretionary bonuses and incentive payments (including commissions) toward a portion of the standard salary level test, such payments must be paid on a quarterly or more frequent basis.
For detailed information and guidance contact your employment law counsel and review the guidance from the US DOL at https://www.dol.gov/WHD/overtime/final2016/faq.htm#N1
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