Injunction Halts Implementation of New Overtime Rules

courthouse(h/t to my colleague, Timothy M. McConville, Esq.)

Earlier this year, the Department of Labor (“DOL”) issued new regulations to the Fair Labor Standards Act that would require changes to how employers classified certain employees unless compensation levels were changed.  This week a Federal Court issued an injunction blocking the implementation of these new regulations that were set to take effect on December 1st.  The injunction was issued nationwide, and therefore, prohibits the DOL from enforcing those regulations anywhere until a final resolution is reached.  The Court’s reasoning behind the injunction was that the DOL exceeded its authority in issuing these regulations.  With this injunction, many employers who had prepared to make changes as of December 1st are now in a holding pattern until the Court finally rules.  Of course, many other forces, such as a change in the administration, may also impact the implementation of these regulations.  Thus, if you are an employer who is subject to the Fair Labor Standards Act, you should reach out to your professional advisor to determine the impact this ruling has on your business.  #overtimerule #businessplanning #DOLenjoined #FLSA @bgnthebgn

2017 Estate and Gift Tax Exemptions

money-2The IRS recently announced the estate and gift exemption levels for 2017 and they continue to increase as per legislation passed in January 2013.  The applicable exclusion amount from Federal estate tax will increase to $5.49 million per person allowing a married couple to shelter $10.98 million from Federal estate tax, the rate for which is currently set at 40%.  The lifetime exemption from gift tax remains coupled with the exemption from Federal estate tax, and therefore, this exemption will also increase to $5.49 million per person.  The annual gift exclusion amount will remain at $14,000 per person.  Virginia continues to not impose a state level estate tax.  Maryland’s exemption from estate tax will increase to $3 million while the District of Columbia’s exemption will remain at $1 million until certain revenue surplus targets are met, which may not be until 2018, at which point the exemption will increase to $2 million.  As a reminder, proposed regulations issued in August will significantly reduce the availability of valuation discounting on certain transfers of interests held in closely held or family owned businesses, and therefore, taking advantage of 2016 exemption levels is critical for some individuals, business owners and families.

For seniors and those with disabilities, a cost-of-living adjustment (COLA) for Social Security and Social Security Income (“SSI”) will increase monthly benefits by 0.3%.  In addition, the cap on the amount of earnings subject to payroll tax will increase to $127,200.  Finally, the tax brackets, standard deductions, Pease and PEP limitations, kiddie tax and other credit and deduction levels for 2017 were announced. #estateplanning #estatetax #gifttax #annualgift #exemptionlimits #COLA2017 @bgnthebgn  

New Fair Labor Standards Act Regulations May Change How You Do Business

(h/t to my colleague, Fran Dwornik, for her informative presentation on this issue.)

Enacted in 1938 in response to the Great Depression, the Fair Labor Standards Act (“FLSA” or the “Act”) regulates Federal minimum wage, overtime and child labor standards.  All employees are covered unless they are deemed to be exempt (i.e., certain executives, administrative, professional, outside sales, computer specialists and highly compensated employees as defined within the Act).   To be exempt, certain requirements must be met that look at the basis for the salary paid, salary level (currently $23,660 per year) and the duties of the employee. 

Effective with the pay period including December 1, 2016, the new FLSA regulations will increase the salary level to $47,476 per year, which will then be updated every 3 years beginning January 1, 2020.  This means that as an employer, if your employee is salaried and not earning $47,476 annually, then either the salary will have to be increased to the new minimum to continue to classify the employee as exempt or the employee will need to be switched to hourly pay and you will have to track hours and pay overtime as appropriate.  There are quarterly catch-up payments that can be made to cure an issue, but you first have to recognize that an issue exists.

Also changing on December 1, 2016 is that the salary threshold to classify an employee as a ‘highly compensated employee’ will increase from $100,000 per year to $134,000 per year, provided the employee performs at least one exempt duty.  This threshold will also increase every 3 years beginning on January 1, 2020.

What does this mean for business owners and employers.  First, employers who are subject to FLSA need to review and analyze their employee records and salaries to determine who will be exempt and who will not be exempt under the new regulations.  Next, employers will have to make some decisions regarding whether to convert currently salaried employees to hourly employees or increase the base salary to the new minimum to maintain exempt status.  If the employer converts employees to hourly pay, this may mean that employees will lose some level of flexibility in their day-to-day jobs as hours will now be tracked.  For example, working from home may no longer be an option for a once salaried employee who now is paid hourly as an employer may want to be able to visibly track hours and time in the office.  If the employer increases base salaries to the new minimum, this may result in an overall reduction of other benefits to cover the increased salary.  More part-time jobs may be developed by employers where there are middle management exempt employees who will no longer be exempt (e.g., retail and restaurant industries). 

Ultimately, the impact of the new regulations is not yet fully determined.  However, if your are an employer subject to FLSA, then you should review your records and sit down with your professional advisor to ensure you are or will be in compliance with the new regulations. #businessplanning #FLSA #newregulations @bgnthebgn