New Overtime Rules are Final
Wednesday, June 1, 2016
Posted by: Gregg Robertson
WASHINGTON, D.C. – The new overtime regulations, proposed by the Wage and Hour Division of the federal Department of Labor (DOL) that could ratchet up your labor costs and make audits of your payroll records potentially even more expensive, were made final in May with an effective date of December 1, 2016.
Currently 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 final regulations will raise the salary limit for mandatory overtime for exempt workers from $455 a week ($23,660 annually) to $913 per week ($47,476 annually), more than doubling the salary limit. This is less than the limits of $970 per week or $50,440 annually in the proposed regulation.
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.
Minimizing the Impact
Company owners should start now to plan for the changes coming this December. 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.
Review Job Descriptions and Classifications Now
Company owners should also use this opportunity to review the job descriptions and classifications of their employees to be sure that they correctly are applying the DOL regulations for exempt employees beyond just the salary limitation.
Many company owners believe that by simply offering an employee a salary above the threshold that they are exempt from the FLSA. However, employees must also meet the tightly-defined job definitions to be considered exempt. These definitions have not been changed by the new regulations.
Audits and Enforcement
Violating the overtime provisions of the Fair Labor Standards Act can subject a company to paying back wages, liquidated damages, fines and penalties. DOL likely will be stepping up audits and enforcement actions in 2017 to see that these new regulations are being implemented properly by employers. Now is a good time to make sure that all is in order.
For more details on the new regulations click here.