NEW OVERTIME RULE SCHEDULED TO TAKE EFFECT 12/1
October 31, 2016
Despite litigation attempting to block the new US Department of Labor (DOL) Overtime Rule (the “New Rule”), it is still scheduled to take effect on December 1, 2016. If your business has not yet become familiar with the new Rule, now is the time. Here are the basics.
In May, the DOL issued the New Rule that updates the overtime regulations in the Fair Labor Standards Act (FLSA) regarding white collar workers exempt from overtime pay. These workers, filling roles in primarily executive, professional, and administrative capacities (the “white collar exemptions”), had been exempt from receiving overtime pay as long as they were paid a salary of $455 per week, or $23,660 annually. Under the New Rule, the salary floor for the white collar overtime exemption is rising to $913 per week, or $47,476 annually. Among other changes, the New Rule also increases the salary floor for exempt Highly Compensated Employees (HCE) from $100,000 annually to $134,004 annually.
Effective December 1, millions of previously exempt white collar employees may be entitled to overtime pay. As a result, employers should examine their rosters to identify employees affected, and to ensure compliance with the New Rule. Employers have a range of options to ensure compliance. For employees who meet the criteria for one of the white collar exemptions, employers may:
- increase the employee’s salary to at least the new salary level to retain exempt status;
- convert the employee to non-exempt, or “hourly;”
- pay the employee his/her current salary, plus overtime for any overtime hours worked;
- reduce or eliminate overtime hours; and
- a mixture of these, or other available options.
Of course, the above options are just the basic solutions, which should be personalized based on your business. Specific consideration should be given to how your employees’ wages are calculated and what options you have for restructuring or recalculating an employee’s compensation package, as under the new rule nondiscretionary bonuses and incentive payments, (including commissions) can satisfy up to 10 percent of the employee’s salary. Other options include restructuring internal organization or employee duties, and perhaps even determining the answer to the most basic question: whether your business or its employees are even subject to the FLSA Overtime Rules. For example, many teachers, lawyers, doctors, and clergy are not subject to FLSA Overtime Rules.
At the Forrest Firm, we are making sure our clients give appropriate attention to the New Rule. Whether it is through our two hour, all-encompassing HR/Employment Law Audit meetings, a conference call, or an in-depth analysis of each employee’s classification, job description, and compensation package, we are here to help determine how the New Rule affects your business, and to help integrate any changes.
Whether you are a current client or not, if you are interested in our HR/Employment Law Audit or specific compliance issues with the FLSA, please email me to get started.