After years of build-up, yesterday the Department of Labor ("DOL") published new rules under the Fair Labor Standards Act that redefine the overtime exemption for "white collar" administrative, executive, and professional workers. These and other related rules are slated to take effect on December 1, 2016, and will have a direct impact on day-to-day workplace operations across the country.
Currently, employees whose job duties qualify them for an overtime exemption must make a minimum of $455 per week ($23,660 annually). The key change in the new rules doubles the salary threshold for exempt workers, which will jump to $913 per week ($47,476 annually). DOL will update this threshold every three years using certain economic indices. DOL's new rules keep in place the existing "duties test."
While compliance would be easiest simply by raising the pay of all exempt employees to $47,476 in annual salary, many employers do not have the capacity to absorb that increase. Thus, groups of employees are likely to move from salaried to hourly, with all of the record-keeping requirements they do not presently have. As such, now is the time to analyze the effect these rules will have on your organization and create a plan for ensuring compliance with the new federal rules. As part of this process, employers should:
- examine whether employees are properly classified as exempt by reviewing wage scales, policies, and job descriptions and by conducting wage audits;
- reclassify certain employees from exempt to hourly status and institute policies to control overtime and ensure employees are properly recording all time worked;
- implement, review, and/or enforce rules for recording hourly employees' time, paying special attention to telecommuting arrangements; and
- manage personnel and overtime costs by, if necessary, reducing hours offered to nonexempt employees, adjusting hourly pay rates, and/or examining benefits offerings.
While the effects of DOL's pending rules are the subject of much debate, one certainty is that the DOL and plaintiffs' lawyers will be watching and waiting to see if employers are making the necessary changes. The Labor and Employment attorneys at Smith Moore Leatherwood are ready to help you evaluate the status of your exempt employees and implement pragmatic, cost-effective solutions to minimize risk and keep your pay practices compliant with the law.
TIP: New overtime regulations will raise the salary threshold for exempt workers. Review and update employee classifications in order to meet federal wage and hour requirements.