How the Coming Changes to the Overtime Rules Will Impact You and Your Employees

All eyes are on the proposed overtime regulations, which are expected to be finalized sometime in 2016. As of November 2015, the Department of Labor had received more than 290,000 comments to the proposed rule. The final rule is also part of the DOL’s Fall 2015 Semiannual Regulatory Agenda, which includes an estimated timetable.

Although we can’t predict when the final rule will be published, we do know that employers typically have at least 60 days to comply with the requirements before the new rules take effect. Now is the time to familiarize with the possible changes, particularly the minimum salary required for exemption as an executive, administrative or professional employee.

What Would the FLSA Revisions Include?

Under current FLSA overtime regulations, employees are eligible for overtime based on their classification as exempt or non-exempt. Non-exempt, hourly employees are entitled to overtime pay at the rate of one-and-a-half times the regular rate for any hours over 40 in a workweek.

Salaried employees, however, are only exempt from overtime if they earn at least $455 per week ($23,660 per year) and meet one of the executive, administrative and professional “white collar exemptions.” Each of these exempt categories assumes a specific set of job duties, such as advanced knowledge in a certain field, exercising independent judgement and/or supervising at least two employees.

Under the proposed new law, the minimum salary level threshold would more than double to $50,440 per year. Plus, there could be changes to the duties tests, which may be dropped altogether or made less restrictive in favor of employee eligibility. The DOL is also proposing raising the salary threshold for “highly compensated employees” from $100,000 to more than $120,000 per year, making applicable employees non-exempt and entitled to overtime.

The proposed overtime regulations are designed to extend overtime protections to millions of lower-paid white-collar employees, regardless of the nature of their job. The last adjustment to the minimal salary level was 10 years ago during the Bush administration. As part of the proposals, the minimal salary will automatically increase each year, based on the 40th percentile of weekly earnings for full-time, salaried employees, as determined by the Bureau of Labor Statistics (BLS).

Preparation Is Key

Although these changes are only proposals at this time, employers should be prepared for the impact on their business. Possible actions include:

1. Increasing salaries for employees earning less than $50,440 annually
   so they’re still exempt from overtime (assuming they meet the job duties tests for executive, administrative and professional exemptions)
2. Reclassifying these employees as non-exempt and paying them on an hourly basis

In the meantime, we’ll keep you informed of further developments with the proposed overtime regulations, including the deadlines for compliance.