The Overtime Train Has Left the Station

On November 22, 2016 by Alix R. Rubin, Esq.

final-overtime-rulingIn case you were wishfully thinking that the election results will stop the new overtime regulations from going into effect Dec. 1, be forewarned that they won’t. Nor will the currently pending 21-state challenge, consolidated with a business group lawsuit against the new regulations

Four million workers will swell the ranks of those eligible for overtime pay on Dec. 1. If you haven’t already, hop on that overtime train now, so you’ll arrive at the correct destination on time and avoid costly fines, lawsuits, Department of Labor audits, legal fees and liability.

What’s Changed?

The salary threshold for employees exempt from overtime will more than double from $455 to $913 a week, or from $23,660 to $47,476 a year. This means that salaried employees who earn between $455 and $913 a week whose primary duties are executive, administrative or professional now will be eligible to receive one and a half times their hourly rate for all hours worked above 40 in any workweek.

The “highly compensated” salary threshold also will increase on Dec. 1 from $100,000 a year to $134,000 a year and must include a weekly salary of at least $913. This means that employees who earn between $100,000 and $134,000 a year and who perform only one executive, administrative or professional task also will be eligible to receive overtime pay.

Non-discretionary bonuses, incentive payments and commissions may be counted to satisfy up to 10% of the new salary threshold, but only if the bonuses or commissions are paid at least quarterly.  The current regulations provide for automatic salary updates every three years, beginning January 1, 2020.  However, the incoming administration, Congress or the courts may change that.

What Hasn’t Changed?

The duties tests for the white-collar exemptions – executive, administrative and professional – have not changed. As always, titles don’t count. Job descriptions that accurately describe what the employee does are key. Improper salary deductions still can destroy an exemption. The two-year look-back period for unintentional violations and the three-year look-back period for willful violations also have not changed. The prevailing party is still entitled to reimbursement of attorneys’ fees.

What’s an Employer to Do?

  • Identify those positions affected: Exempt employees earning less than $913 a week.
  • Audit each position: Does it meet one of the duties tests?
  • Crunch the numbers:
    • If the salary is close to $913 a week and the employee typically works more than 40 hours a week, you may want to raise the salary to the threshold.
    • If the salary is closer to $455 a week, you may want to reclassify the employee as non-exempt and either limit overtime or reduce the hourly rate (but not below minimum wage).
    • Hire part-time workers so your full-time workers don’t have to work overtime.
    • Shift workloads to exempt employees.
    • Budget bonuses, commissions and other incentives to raise salaries to the threshold.
    • Use technology to create efficiencies and reduce hours.

Some of these solutions may create morale problems among your workforce. Be sure to keep your employees well informed. Update your overtime policy to include a provision that working overtime without prior approval will result in discipline (but not the withholding of overtime pay). And beef up your time-reporting procedures, as it is likely that you will be required to keep time records for more employees than before.

 

 

 

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