New DOL Overtime Rule


New DOL Overtime Rule:

On May 18, 2016, the U.S. Department of Labor released its final Rule regarding changes to the overtime threshold for the Fair Labor Standards Act.  The final Rule doubled the minimum salary and compensation levels needed for executive, administrative, and professional workers to be exempt from overtime, from the previous level of $455 a week (or $23,660 a year) to $913 a week ($47,476 a year) with increases every three (3) years thereafter.  Additionally, the final Rule amends the salary bases test to allow employers to satisfy up to ten percent (10%)  of the new standard salary level by applying nondiscretionary bonuses and incentive payments (including commissions).  The effective date of the final Rule is December 1, 2016.

The Rule also updates the total annual compensation level at which “highly compensated employees” will be ineligible for overtime.  The final Rule raises this level from the current $100,000 to $134,004 a year.

The effect of the Rule change is practical and immediate, especially for small businesses.

The basic options available to an employer in addressing this Rule change are as follows:

Raise salary and keep the executive administrative or professional employee exempt from overtime.  This option would appear especially attractive for employees who have salaries close to the new salary level and regularly work overtime.

Pay overtime in addition to the employee’s current salary when necessary.  This approach appears attractive for employees who work forty (40) hours or fewer in a typical work week, but have occasional spikes that require overtime for which employers can plan and budget the extra pay during those periods.  This includes seasonal employees, nonprofits, retail restaurant, and manufacturing industries.

Evaluate and realign hours and staff workload.  For example, employers can ensure that work load distribution, time and staffing levels are all managed appropriately to ensure an even flow of work.

Once these options have been considered, employers employing non-exempt salaried employees must track the number of hours their salaried employees work.  Having an accurate calculation of hours worked per week will be critical as the employer seeks to comply with the new Rules.  Litigation over FLSA issues, particularly among recently terminated employees has proliferated, particularly in the Southeast as FLSA mandates employer’s payment of attorney’s fees to a successful FLSA litigant.  While there is no requirement that employees “punch in” and “punch out,” a time and attendance tracking program that helps employers accurately manage their employees’ hours could prove critical in litigation.  Further, employers should consider instituting an explicit policy prohibiting overtime without authorization of a designated manager.

The Rule change figures to have a profound impact, particularly on small seasonal, retail restaurant, cyclical and manufacturing businesses.  As it figures to add to an already exploding area of litigation, it is recommended that employers consult with their accountants and attorneys to fashion the most appropriate and cost effective strategy for complying with the Rule.

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