New Department of Labor Overtime Rules
A U.S. District Court judge in Texas recently granted a preliminary injunction blocking the Department of Labor’s new overtime regulation as discussed below from going into effect on December 1, 2016. The injunction gives the court more time to review the rule and make any final decision. It’s not a victory, but it’s certainly delayed implementation. We will keep you informed as additional developments arise.
The following is from our original June 2nd e-mail alert:
Many of our valued clients are not yet up to speed and ready for the new overtime and worker classification changes to the Fair Labor Standards Act. Why do these changes matter? Because it may affect how you pay at least some of your employees in the near future. In brief, if you have a salaried worker making under $46,467 per year, you will either need to give them a pay increase, cut them to hourly, or start paying them overtime when they work more than 40 hours per week. The new overtime and worker classification rules doubles the previous threshold from $23,660 that salaried employees could make and be considered non-exempt from. These rules go into effect December 1, 2016 unless Congress acts to modify them. Here is what you should consider or do in the meantime if you feel you may be impacted.
Examine Current Pay and Classifications. One of the first steps is to review your employees’ compensation structure, their classification and the rules regarding exempt vs. nonexempt status. Your employees that earn more than the new threshold of $46,467 can be classified as exempt from overtime if their work consists mostly of executive, administrative or professional duties. This is where having a solid understanding of their actual work duties is critical. Employees who earn less than that new threshold are probably classified as non-exempt, meaning they can earn overtime.
Monitor Employee Hours. Just as important as classification and pay, it’s critical to determine the hours worked per week, as it’s critical to determine overtime pay, if an employee is non-exempt. Consider either reducing an employees hours to part-time, or to minimize the amount of work that a salaried worker spends doing work. Consider using a time and attendance system that tracks hours and can alert management when an employee nears or exceeds the standard 40-hour work week.
Compare the Costs of Pay. It may make good business sense to convert certain employee from salary to an hourly pay rate, and then pay them overtime as necessary. This can be most useful when an employee does not consistently work 40 hours per week, but it requires more attention be paid to managing their work schedule.
Impact on Pay Equity. In order to ensure that your employees are being paid fairly and based on their job, do not make changes on a per-employee basis, but instead based on their roles. This is especially important for businesses with low turnover.
Proactively Control Costs. If workflows require employees work outside of normal working hours and that leads to overtime for non-exempt staff, there is the duty to pay them overtime. This is a good time to consider situations which possibly result in overtime. Is it in your best interest for your employees to be working after hours, on weekends? If not, then establish workplace policies that prevent or discourage your non-exempt employees from working outside of the established traditional working hours.