The FLSA's "Final Rule" and How to Prepare for It
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Paul R. Bedard, Esquire
The fact that many employers struggle with wage and hour compliance, combined with employees having a greater awareness of their employment rights, has contributed to an already healthy boost in wage and hour disputes. A new law will almost certainly increase the volume of these disputes. The Fair Labor Standards Act's "Final Rule" takes effect on December 1, 2016. This new law dramatically raises the standard salary level for exempt employees and will further accelerate the increasing trend of wage and hour litigation.
Melissa Knowles, Vice President of Gym HQ, a ClubReady Company, has been providing valuable information to readers of Club Insider through an excellent series of articles designed to help fitness business owners prepare for the Final Rule. Due to the impact the Final Rule is anticipated to have within our industry, Norm Cates, Club Insider Publisher, has requested that I provide additional content in this regard in order to help reinforce for fitness business owners what it will take to be fully prepared for the impending legislative changes. By developing a thorough understanding of the new law, and by analyzing how it applies to your business, you can achieve legal compliance and avoid becoming a statistic tied to the inevitable increase in wage and hour litigation.
Whether due to an agency-initiated investigation by the Department of Labor (DOL), or a complaint lodged by an employee, the burden falls on the employer to demonstrate compliance within a wage and hour case. The DOL reports that, in fiscal year 2015, more than 42% of their investigations were agency-initiated. Violations were found in 79% of these investigations. The DOL estimates that the Final Rule will automatically extend overtime pay protections to over four million workers within the very first year it takes effect. Given the composition of salaries and labor within most health clubs, club owners and operators should anticipate that many of these newly protected workers are current employees. However, preparation and application can help you avoid becoming a legal statistic.
This article is not intended as legal advice. Rather, it is intended to educate health club owners and operators regarding significant changes to overtime regulations and to provide suggestions aimed at helping to achieve compliance with these changes. Widely varying state and local labor laws and case precedents specific to each jurisdiction prohibit one-size-fits-all recommendations. Please consider these comments as merely a guide to help you when you consult your attorney for specific direction.
Within the fitness industry, General Managers, Assistant Managers and Fitness Managers are typically classified as exempt employees. The FLSA mandates that employees are paid overtime when working in excess of forty hours per week unless they are exempt employees. In order to be deemed exempt, employees must meet a 2-part test; a salary basis test and a duties test. Although the duties test has not been changed as a result of the Final Rule, the salary basis test has been dramatically altered. Worthy of note, the salary level test does not apply to outside sales professionals.
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