*Post Warning* I’m not a lawyer, accountant, etc…I’m just sharing something that you may be interested in learning more about and that may affect your business. Seek legal council.
In May 2016, the US Department of Labor published the Final Rule to Update the Regulations Defining and Delimiting the Exemption for Executive, Administrative, and Professional Employees. This fact sheet lays out important information related to paying employees salaried or hourly.
At first glance this ruling seems complex and needs some time to digest. I highly recommend you discuss with your lawyer/accountant on the matter to see if it applies to your business.
Here’s the basic overview that applies mostly to gyms in our industry.
Key Provisions of the Final Rule
The Final Rule focuses primarily on updating the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt. Specifically, the Final Rule:
- Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South ($913 per week; $47,476 annually for a full-year worker);
- Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004); and
- Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.
Additionally, the Final Rule amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.
The effective date of the final rule is December 1, 2016. The initial increases to the standard salary level (from $455 to $913 per week) and HCE total annual compensation requirement (from $100,000 to $134,004 per year) will be effective on that date. Future automatic updates to those thresholds will occur every three years, beginning on January 1, 2020.
Basically, what this means is that all of your salaried employees must be paid a minimum of $47,476 or they must be on an hourly wage and paid overtime. This could have major effects on gym’s across the country. There is some exemptions that apply, most notably if your business makes less than $500,000* annually in revenue.
*Now, if your gym’s annual revenue is less than $500,000 you may not have to comply with the FLSA. You can do a check by answer this questionaire on the DOL website here: http://webapps.dol.gov/elaws/whd/flsa/scope/screen24.asp. Once again I recommend speaking to your lawyer/accountant to verify that you.