If your homeowners association currently people in any capacity, including for maintenance or HOA management reasons, you’ll be impacted by the new Fair Labor Standards Act (FLSA) overtime rule that will be going into effect on December 1st, 2016.
If you have questions or are unsure of exactly how the new rule will impact your association, this article will shed some light on the matter. It’s important as a board member to be informed about the changes that will be made and what your options are.
The New Overtime Rule and HOAs
An update to the overtime rule, which determines employees that are eligible for overtime, was announced earlier in 2016 by the U.S. Department of Labor. Once the rule rolls out on December 1st, an employee will have to be making over $47,476.00 to be exempt from overtime or salaried. That means anyone making less will have to track their hours worked and for any hours worked over 40 per week, they will need to be paid overtime.
This is quite a change from the current rules on overtime where an employee must be salaried and paid at least $23,400 (referred to as the “salary test”) and performing certain duties (the “duties test”) to be exempt from overtime pay. With the new rule, employees will have to pass both tests as well as meet the pay threshold to be exempt.
Changes in Your Association
These changes will undoubtedly change some things in your HOA, so it’s important to be prepared for your next steps. In order to make sure you’re in line with the new regulations, you’ll need to either 1) keep the employee in question at the wage they’re already earning but make them eligible for overtime, since they will have to become hourly or 2) increase the employee’s salary to at least the $47,476.00 threshold.
However, the first option is not necessarily a possibility. If you hire someone in a professional position, such as a manager for your community, they must remain a salaried employee because of their fiduciary responsibilities and management duties. That means you might be increasing your costs quite a bit per person.
The best initial course of action now is to have your board assess current staff members to figure out the cost increase you’ll be facing from higher salaries or more overtime.
Then, consider how you can offset higher costs through expenses or higher assessments. Come up with a plan of action before speaking with the employees who will be affected by this change so you’re prepared to be open with them and explain what happens next for them.
Cedar Management Group specializes in helping HOAs and condo associations like yours determine best actions in situations like these. For more information about how we can help manage your community and assist with decisions that impact everyone involved, contact us today.