Reminder for Plan Sponsors: FLSA Amendments Go Into Effect August 23

August 17, 2004 ( - Get out your red pen. Circle next Monday, August 23. Now in big block letters write FLSA AMENDMENTS TAKE EFFECT.

>On Monday, August 23, less than a week away for those following instructions, the Department of Labor’s (DoL) much maligned and hotly contested revisions to the Fair Labor Standards Act (FLSA) will go into effect.  The final rules, which updates the “white-collar exemption regulations” to section 541of FLSA, will be the first update to the 1938 act in the past 28 years.

>The rush to compliance first appeared in April, when the Department of Labor (DoL) announced updates to the “white-collar exemption regulations” to section 541of FLSA (See  DOL Releases FLSA Changes ).  Under the final regulations, workers making less than $455/week ($23,660/year) will be guaranteed overtime protections regardless of job duties.  This is a boost from the initial threshold levels that were being circulated of $425/week (about $22,100/year) and a significant boost to the old rules that only provided overtime protections to workers making less than $155/week (about $8,000/year).  The new regulations also provide guarantees to certain classifications of workers that previously were not guaranteed overtime protections.

>To assist companies and their HR departments, the DoL bundled all the relevant compliance information on the Web site .  This site includes a more detailed explanation of all the changes in addition to fact sheet for employers to use to determine overtime exemption for executive, administrative, professional, computer and outside sales employees, which have long been a rather tenuous classification process for employers.

Ready, Set, Go?

Yet a surprisingly large number of companies do not appear prepared for the new regulations to take effect as recently as the end of June.   Overall, 20% of the 150 companies polled by Hewitt Associates said they will not meet the late-August deadline for compliance, while 23% said they will meet the required date, but only with additional resources allocated to the effort. Among those that need more time, the median is an additional 80 days beyond the deadline.

Asked what the largest hurdle is, 26% of companies said existing job documentation is old, incorrect or inconsistent, while another 24% said their primary issue is with understanding the new rules. Occupations presenting the greatest classification problems are IT (57%) and shift/production supervisors (42%), employers told Hewitt.

One reason for the outdated job data is the lack of FLSA audits in the past.  Forty-six percent of companies said they had FLSA job audits in the past three years only as required (upon challenge), while 45% said these audits were not conducted regularly.  Going forward, 75% have no formal plans or don’t yet know how often they will conduct FLSA audits in the future.