FLSA Proposed Overtime Rule Changes One Step Closer To Being Published
On Monday, March 14, the Department of Labor (DOL) sent its final changes for determining which workers will be eligible for overtime pay to the Office of Management and Budget (OMB) to review, which could take as long as several months or as short as a few weeks.
The revision to Fair Labor Standards Act regulations could extend overtime protection to millions of employees currently considered exempt. Once these changes have been reviewed, the final ruling will be published in the Federal Register and will be implemented within 60 days of its publication.
According to Tammy McCutchen, an attorney with Littler in Washington D.C., and a former administrator of the DOL’s Wage and Hour Division, shared with attendees at the SHRM Employment Law & Legislative Conference on Monday that the proposed rule, which was released on June 30, 2015, will most likely be published by July 7, 2016, and take effect on Labor Day, Sept. 5, 2016. Alternatively, she said the rule would be published the Friday before Labor Day, Sept. 2, 2016, and take effect just prior to Election Day on Nov. 1, 2016.
What are the changes under the proposed rule?
There are some factors you should know under the proposed rule:
- Currently, the minimum salary to meet overtime pay exemption is $11.37 per hour, $455 per week or $23,660 per year. Some states have minimum wage laws that exceed $11.37 per hour. Should the DOL proposed increase go into effect, it would mean $12.87 more per hour, $515 more per week or $26,780 more per year—more than double the current minimum.
- Simply put, any employees currently making less than $24.25 per hour, $970 per week or $50,440 annually that are currently ineligible for overtime pay may now be eligible for overtime pay beginning in 2016.
- In order for employees to be exempt from receiving overtime pay, they must meet both the job duties test and the minimum salary requirement. If they fail either test, they will not qualify.
- Many employers will now have employees who will have to be reclassified as non-exempt, even if their responsibilities would qualify because they do not make more than $50,440 a year.
- Employees who are exempt from overtime pay today, due to their job duties and meet the current minimum salary requirement of $26,780 annually, may not meet the new salary requirement of $50,440 annually. Those employees would need to be reclassified as non-exempt and would be eligible for overtime pay for hours worked over 40 in the workweek.
- More employees will be considered eligible for overtime as the salary level rises. The salary-level threshold would be updated annually based either on a percentile or inflation.
Although the final ruling and the final date on which it will be published remains uncertain, it is best to prepare now for its implementation as a company.
- Evaluate your current workforce and how these anticipated changes would affect your organization.
- Identify any employees currently exempt from overtime pay that make less than the new salary requirements, as these employees will now be eligible for overtime pay.
- Consider the possibility of reducing hours worked to 40 or less per workweek, in order to avoid overtime pay.
- Be diligent in watching hours worked for those employees who do not meet the new salary requirements, or you will be legally obligated to pay overtime pay at a rate of 1-1/2 times their normal rate of pay for all hours worked over 40.
- Let Total Reward Solutions help you evaluate all of your options relative to these proposed changes and make recommendations on what option is best for your organization, along with an effective roll out and communication plan.
Call us today at 317-589-8529 to discuss how we can help you work through the new proposed regulations and its impact on your organization.