The Proposed Overtime Regulations: How Could They Affect You?
Thursday, May 5, 2016
Posted by: Gregg Robertson
WASHINGTON, D.C. - New regulations announced by the Wage and Hour Division of the federal Department of Labor could ratchet up your labor costs and make audits of your payroll records potentially even more expensive.
The comment period has closed and the regulations will take effect December 1, 2016.
Employees that are exempt from the overtime provisions of the Fair Labor Standards Act (FLSA) now must meet three criteria: they must be paid a salary; that salary must be more than $455 a week ($23,660 annually); and they must perform work that is executive, professional, administrative or outside sales in nature.
The new regulations will raise the salary limit for mandatory overtime for exempt workers from $455 a week ($23,660 annually) to $913 per week ($47,4476 annually), more than doubling the salary limit.
What that means is that more of your employees could come under the federal overtime rules. Salaried employees who perform work that is primarily executive, administrative, professional or outside sales that may have been exempt from mandatory overtime pay will now come under those rules if their salary is less than $47,476 annually.
How would this new regulation affect your company?
It’s important realize that this new regulation will only affect jobs that are now exempt from the FLSA overtime and minimum wage rules and are paying less than $913 per week. Any jobs that are paid on an hourly basis are not exempt from the FSLA and will not be affected by this rule change.
Take a look at how many of your employees are currently exempt employees. If you don’t know which of your employees are exempt, here’s a brief rundown on the three criteria that determines whether an employee is exempt. An employee must meet all of these criteria to be considered exempt. More detailed instructions for determining whether an employee is exempt can be found on the DOL website.
First, to be exempt, employees now must be paid a salary. Being paid a salary is defined by DOL as “an employee (who) regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent basis, regardless of the number of days or hours worked.”
Second, to be exempt, the employee must be paid a salary of at least $455 a week or $23,600 per year (or $913 per week or $47,476 after December 1).
Third, and this is the most complicated part of this regulation, to be exempt the employee must be performing work that is executive, administrative, professional or outside sales. The DOL has much more detailed definitions for each of these categories of exempt work, so you should visit the DOL website if you have questions about what constitutes work in each of these categories.
If these rule changes take effect, exempt employees that are being paid a salary greater than $913 per week or $47,476 annually, will not be affected, but employees who are now exempt and making less than $913 per week will no longer be exempt from overtime and minimum wage requirements.
Green industry companies are most likely to have exempt employees in jobs such as administrative office work, designers and landscape architects, sales and some higher level supervisory personnel.
What You Can Do
If this rule change takes effect, company owners can minimize the financial impact by:
- Limiting the hours of non-exempt employees to minimize overtime payments
- Providing raises to non-exempt employees (who otherwise meet the salary and work requirements for exempt employees) that would take them over the $913 per week salary threshold if that would be less expensive than paying overtime.
- Set the hourly wages of newly non-exempt employees so that their regular time plus overtime averages out to their previous salary.
- Hire a part time employee at straight-time to pick up the time-and-a-half overtime of another non-exempt employee.
If you think that this rule change would negatively affect your operations, there are two steps you can take:
- Call your Congressman and Senator.