This summer, the U.S. Department of Labor is expected to publish changes to the rules that govern worker overtime. The proposed changes are expected to significantly increase the number of employees eligible for overtime pay.
Currently, the 1938 Fair Labor Standards Act guarantees overtime pay to many workers. The act does have exemptions to overtime eligibility such as the “white collar” exemption. Employees who have executive or managerial duties are only guaranteed overtime if they earn less than $23,660 a year. The new proposed DOL changes could more than double the overtime eligibility to $50,440. The current proposal also ties any future increases automatically to inflation and sets them at the 40th percentile of earnings.
Many employers seem to be leaning towards two quick and easy strategies to deal with the changes as they are currently written.
First, employers in many cases might reclassify workers that are no longer considered exempt to hourly employees and then simply pay them overtime. Secondly, any employees who have salaries close to the $50,440 a year threshold, might have their salaries increased to avoid being owed overtime pay.
Regardless of whether the regulations will be released in mid or late 2016, employers should be prepared for these changes and understand the significant impact they will have on their businesses. Employers of all sizes and in all industries should review their job descriptions to determine whether they accurately reflect employees’ job duties and the skills necessary to perform each job, paying close attention to the duties necessary to fall within the various overtime exemptions.
Employers should also conduct a self-audit to determine what changes they may need to make to employee classifications. At a minimum, employers should identify those employees in exempt positions who currently fall near or below the proposed salary threshold of $970 per week, as well as those who currently fall under the “highly compensated” exemption.
501(c) Agencies Trust plans to provide training surrounding the new overtime rules this summer. Stay tuned for details.