05/20/2016The U.S. Department of Labor (DOL) published colossal changes to the overtime rule that will make approximately over 4 million currently exempt employees eligible for overtime pay later this year!
All employers will have to comply with the changes made to the overtime regulations of the Fair Labor Standards Act (FLSA) by December 1, 2016.
What are the changes?
- The minimum salary needed to preserve most exemptions (in addition to meeting the proper duties test) will rise from $23,660 to $47,476 per year which is actually lower than expected, based on the proposed regulation.
- Workers who earn up to $47,476 a year ($913 a week) will have to be paid overtime, even if they're classified as a manager or professional.
- The minimum salary needed to preserve the Highly Compensated Employee (HCE) exemption will rise from $100,000 to $134,004 per year.
- The minimum salary will reset every three years, starting on January 1, 2020. The new minimum will be announced 150 days in advance (on August 1, 2019 for the January 2020 increase). Based on current projections, the salary threshold is expected to rise to more than $51,000 with its first update.
- Those minimum salary levels are tied to a percentage of the earnings of full-time salaried workers in the lowest-earning Census region, the South, which is comprised of AR, LA, OK, TX, AL, KY, MS, TN, DE, DC, FL, GA, MD, NC, SC, VA and WV.
- Up to 10% of the salary minimum for non-HCE workers can be met via payment of non-discretionary bonuses, commissions or incentive pay so long as the payments are made quarterly or more frequently.
- No changes were made to any of the duties tests.
What do you do as a Human Resource Professional?
- First, identify exempt positions where employees earn less than $50,000.
- Next, review those job classifications and your compensation levels and make some decisions. Decide for which positions you will increase the salaries above the new salary level.
- For those employees likely to be reclassified, you will need to review the following:
o What tasks those individuals perform on a weekly basis and how many hours they usually work?
o What job duties can be redistributed or eliminated?
o Can an entire function can be outsourced?
o Also consider whether benefits will change for workers moving from exempt to nonexempt.
- Once decided, you will need to decide how and when to notify the employees that will be effected.
- Policies and procedures will need updating and plan on educating newly nonexempt workers and their managers on unfamiliar topics such as proper record-keeping, compensability of travel time and more.