The FLSA does not provide an exemption from its minimum wage and overtime requirements for small businesses. The FLSA applies to your business if the business has an annual gross volume of sales made or business done totaling $500,000 or more. Even if the $500,000 threshold is not met, individual employees of the business are covered by the FLSA if they engaged in interstate commerce or the production of goods for interstate commerce. Note: this can be as simple as consistently sending mail out of state.
(2) How do non-discretionary bonuses and incentive payments apply to the Final Rule?
Under the Final Rule, employers may use non-discretionary bonuses and incentive payments, including commissions, to satisfy up to 10% of the salary level ($913 per week, $47,476 annually). For employers to apply these payments to the salary level, they must make the payments on a quarterly or more frequent basis. If the employee does not earn enough discretionary bonuses or incentive payments in a given quarter to retain his or her exempt status, am employer may make a catch-up payment no later than the next pay period after the end of the quarter.
(3) Remind me, what is a non-discretionary bonus?
A non-discretionary bonus is a bonus paid as part of a prior contract, promise, or announcement to the employee. A discretionary bonus, such a a spur of the moment “good work” bonus, cannot be used to satisfy the salary level threshold.
(4) How long do I have to comply since this will probably be challenged by Congress?
The Final Rule is effective December 1, 2016 – 155 days from today. The Final Rule may be challenged in Court. Although an ultimately successful challenge could result in a stay of enforcement from the Department of Labor, an employer would be ill-advised to roll the dice, especially since litigation can be a long process and compliance would be required in the interim of any potentially successful challenge. As to Congressional involvement, it is possible that Congress will exercise its rights under the Congressional Review Act to revise or retract the rule. Keep in mind, however, that a successful CRA action is still subject to Presidential Veto. In short, there is no way to predict whether this rule will be challenged, as much hinges on upcoming elections. What we do know – waiting on election results and then the actions of the 2017 Congress is not an option with a Dec. 1, 2016, compliance deadline.
(5) None of this applies to my business because it is a non-profit, right?
Wrong. Non-profit organizations, like other businesses, are subject to the same tests (discussed in Question (1)) for FLSA coverage. If the non-profit is covered under the FLSA, then the Final Rule applies equally to the business. One caveat to keep in mind, income provided to non-profit organizations in the form of contributions, membership fees, monetary donations, and used to in furtherance of charitable activities, i.e., activities provided free of charge (such as counseling services, temporary shelter, food, etc.) are not factored into the $500,000 threshold.