Overtime Rule Changes Are Coming - Is Your Business Ready?

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Kelly Schoening Holden, Dressman Benzinger LaVelle psc
June 2016

The Department of Labor (DOL) has issued some proposed changes to the overtime regulations pursuant to the Fair Labor Standards Act.  This is the first amendment since 2004 and if finalized, it will have significant impact on businesses. 

The major change proposed is an increase to the salary level to qualify for exemption from overtime.  The current level is $455 per week ($23,660 annually) and that would increase to $921 per week or $50,440 annually.  Obviously, this is a significant increase that will have a substantial impact on who must be paid overtime.  Additionally, the DOL proposes to automatically update the salary level on an annual basis for the first time ever.  The DOL estimates that it would extend overtime protection to over 5 million workers, which means increased wages/costs to businesses. 

There is also discussion to modify the duties test for white collar exemptions.  The DOL is proposing a strict division of labor test requiring individuals to spend at least 50 percent of their working hours performing executive, administrative or professional duties.  Another change is to the highly compensated individuals.  The current salary level is $100,000 and the proposal is to increase it to $122,148. 

The DOL sought comments last fall to the proposed changes and it is anyone’s guess as to how those comments will affect the final regulations.  It has been reported the final regulations were submitted to the Office of Management and Budget (OMB) for printing and should be issued this summer.  Businesses will have 60 days to comply with the new regulations, including reclassifying currently exempt employees into hourly. 

If your business has an exempt employee who is below the $50,440 threshold, it is wise to evaluate that position to determine if it makes sense to raise the pay to keep the exemption or change the position to avoid excessive overtime costs.