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Proposed Overtime Rule Changes

by | May 10, 2016 | Business Insurance, Employee Benefits, Fair Labor Standards Act, General, Uncategorized

Overtime

As a reminder, the federal government has a proposal to amend the overtime regulations that are currently in place. In November, 2015 we offered a live webinar that detailed the current regs, myths and the proposed changes. That webinar is recorded and can be accessed via this link, New Proposed Overtime Regulations –

Here are some highlights from that presentation and links to the government’s site, Dept. Of Labor,  regarding these regulations:

Myths:

  • All employees receiving a fixed salary are exempt from overtime.
  • So long as employers comply with the Federal Fair Labor Standards Act (FLSA), they cannot be liable for unpaid overtime.

Current Regulations under the Fair Labor Standards Act (FLSA):

  • Employers must pay non-exempt employees time and one-half for all hours worked over 40 in a given work week.
  • Employees are exempt from overtime if they:
    • receive a minimum salary of $455 per week
    • are paid on a “Salary Basis”
    • satisfy one or more of the “White Collar” exemptions

Proposed FLSA amendments:

  • Raise the minimum salary under the Salary Basis test from $455/wk ($23,660/yr) to $970/wk ($50,440/yr).
    • Will be indexed thereafter so that it automatically increases each year
    • Target: 40th percentile of earnings of full-time salaried workers
  • Increase the annual, minimum compensation for the Highly Compensated Employee exemption from $100,000 to $122,128.
  • While the Department of Labor has indicated that it has no intent to change the following, it has asked for comments on whether:
    • any of the duties tests under the “White Collar” exemptions should be modified
    • a quantitative test (e.g., 50% of working time) should be added to the definition of “primary duty”
    • employers can credit non-discretionary bonuses and commissions toward the minimum salary requirement

The Potential Impact:

  • More than 5 million workers will become eligible for overtime
  • More than 50% of employees in eight states will become eligible:
    • Arkansas
    • Florida
    • Louisiana
    • Mississippi
    • North Carolina
    • Oklahoma
    • Tennessee
    • West Virginia
  • Some employees will consider being classified as non-exempt to be a demotion (punch a time card, etc.)
  • Can lead to litigation of past practices

Timing:

Final Rule not expected until mid-2016, but timing impacted by:

  • 2016 Presidential Race
  • November 2016 Congressional elections
  • Potential litigation
  • Almost every rule proposed by the DoL during the Obama Administration has been challenged in court

How can an employer prepare?

  • Identify those employees currently classified as exempt but making less than $970/week and determine:
    • cost impact of classifying as non-exempt
    • cost impact of keeping as exempt, but raising salaries to minimum level
    • whether other exemptions may apply, particularly those not utilizing the Salary Basis test
  • Seek legal guidance from a qualified attorney

Where can more information be found?