New Minimum Exempt Salary Requirements

Bob Blanchefiled

Attorney
Cell Phone: 407-497-0463.
Email: bob@blanchfieldlawfirm.com
LinkedIn

Eric Kurbanov

Co-Founder MyHotWorks

Email: eric@myhotworks.com
LinkedIn

MINIMUM EXEMPT SALARY REQUIREMENTS – Video transcript

**Eric**
On December 1, 2016, new legislation regarding exempt salary employees is set to take effect.

Hello! My name is Eric, and I have Bob with me here today. He has been a very good friend of ours for many years. Bob, could you tell us a little bit more about yourself before we get into this new ruling, a new law that is coming into effect on December 1?

**Bob**
Sure, Eric! Thanks!
My name is Bob Blanchfield, and I’m an attorney. I am licensed in Tennessee and Florida. Although I represent clients in about 15 states, my primary area of practice is in employment law, and by that, I mean I represent small to midsize businesses in discrimination cases, family, medical e-VAT, and other cases. If you’re a business, for example, in the hospitality industry or if you own a hotel or restaurant, you are particularly susceptible to certain types of claims, and you’re also more likely to be audited by the Department of Labor.

Over the past several years, the most common claim in federal court has been a claim for overtime pay or violation of the federal minimum wage Law. That law is incorporated into the Fair Labor Standards Act. I won’t bore you with all the Fair Labor Standards Act details, but one rather dramatic change that’s coming up that should take effect in December is a change in the minimum salary that an exempt employee should be paid. By that, what I mean is if, for example, you own a hotel and have a housekeeping supervisor that you’re paying $35,000 per year, you’re not paying that person overtime and you’re not keeping track of hours. But you would guess that employee might work about 50 to 55 hours per week. Right now, as long as you pay her more than $24,500 per year, or about $455 per week, you comply with the law. This rather dramatic change is going to increase that minimum from $24,500 to approximately $48,000.

So what do you do about that?
Well, you can convert that employee to an hourly employee, but there are some risks. You could increase the annual salary from $35,000 to about $48,000 per year, but of course, that’s a drastic increase. If you have an employee that you’re only paying them $26,000 per year, you’re now looking at a $22,000 annual increase. So it’s something that an employer should really be paying attention to, Eric.

**Eric**
Yes, definitely. It’s a huge jump in annual salaries in industries like hospitality.

**Bob**
Yeah! I think it’s difficult when you have a business, whether it’s a restaurant, hotel, or others in the hospitality industry, where labor costs are a significant portion of the total cost that an employer faces.

**Eric**
And what are some of the most common questions that you get asked about this?

**Bob**
Well, I have many clients that have thought about this, and one of the most common questions I get is “What are my options as a business owner?” And really, there are two primary ways to go. One is simply increasing that annual salary. However, many employers simply are not in a financial position to do so. So another option would be to convert that employee to an hourly rate, where their total annual compensation remains the same. You simply have to do some calculations to figure out what an appropriate hourly rate would be and pay overtime if that employee works more than 48 hours per week.

There are some other options. They’re a little more complicated to explain, but if you have an employee whom you’ve agreed to pay a certain weekly rate for a certain number of hours worked, you might only be on the hook for overtime above that number. So if you agreed to 50 hours per week, you’ll probably get away with only paying overtime over those 50 hours. You know a risk is associated with almost every option out there. The safest option is probably just increasing the salary to the new limit. So that is probably the most common question I get. Another question is “When is this going take effect?” We don’t know the specific date, but it’s in December, so it’s coming up quickly.

**Eric**
I see. So right now, it’s October. And there are so many people that have not heard about this yet. I’m actually very surprised. I mean, the hotel owners and other business owners do not know that this change is coming up. It’s very surprising to me, and you’ve done really well with us. You let us know, in fact, in May so that we had enough time to get prepared and calculate our options. But it’s amazing how many people don’t know about this yet.

**Bob**
Well, I think it’s like a lot of changes in the law; the change will have a significant impact. Businesses obviously are not going to be happy with this conversion, and I don’t think it’s been published or advertised well by the administration because they know the reception will not be a happy one. I know there have been some challenges to the law, but so far, none of those challenges have been successful. I would also say that the folks that are prepared for this change are some of the plaintiffs’ attorneys. So once this law takes effect, my assumption would be that you will see advertisements, especially in states with aggressive plaintiff bars, like Florida, California, New York, and possibly others where you’ll see advertisings specifically addressing this issue looking for employees that are still being paid below $48,000 and are considered salaried.

And it’s always important, Eric, that you and I have discussed this for all your hourly employees. You want to make sure you have a very reliable timekeeping system and you enforce your rule that all your hourly employees must use that timekeeping system, whether it’s a POS system, time clock, or whatever it happens to be.

**Eric**
This is very great information, and if there is somebody who would like to get in touch with you and maybe work out some kind of strategies to implement in regards to this change, how can they do that?

**Bob**
They can reach me either directly on my cell phone at 407-497-0463. They can reach me by email at bob@blanchfieldlawfirm.com, or they can find me on LinkedIn. I’m Robert Blanchfield. There are a few Robert Blanchfield, but I’m in Winter Park, Florida.

**Eric**
Alright, great! And also, we’re going to have your contact information below this video. But you work in more than one state. Is that correct?

**Bob**
That’s true! I’m licensed in 2 states, but I’m licensed in federal court in many other states. So, I have represented employers in about 10 states, but I also have business owner clients in about 8 more states. There are around 15 to 18 states in total where I represent employers. If I can help a business owner put in place some new policies or procedures that reduce their risk of litigation, that’s really the best approach.

**Eric**
An ounce of prevention, is much more valuable than a pound of cure. I’m not sure if I said it right.

**Bob**
You made a right point. For a relatively small amount of my time, you can avoid litigation because once that lawsuit is filed, whether it’s for overtime or discrimination, the clock is ticking, the cash registers are being rung up by that plaintiff attorney, and it will quickly become expensive. However, if you try to address some of these issues up front, usually it’s fairly inexpensively and fairly quickly to implement.

**Eric**
Yes, it’s a very good approach to be prepared, and December 2016 is coming up fast. If it does take effect in December, there is still some time left to put those strategies in place.

Bob, I want to thank you for all your time, and we will leave all your contact information below the video. And if all the people who are watching this video liked it, please subscribe. We are going to have many more videos like this coming in the future.

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