Is your organization ready for the new overtime rules?

Major changes take effect December 1, 2016

NEWOVERTIMERULES2 

The US Department of Labor announced a final rule to extend overtime protections to approximately four million workers. The rule has to do with the thresholds that determine who is and isn’t exempt from overtime rules under the Fair Labor Standards Act (FLSA). The rule will take effect on December 1, 2016.

Current rules state that certain executive, administrative and professional employees are exempt from overtime regulations if they work more than forty hours per week. One important factor in determining who is and isn’t exempt from overtime is salary threshold. Under the existing rule an employee must be paid at least $455 per week, or $23,660 annually in order to be considered exempt from having to be paid overtime. The new rule would raise that amount to $913 per week or $47,476 annually. The rule will also raise the threshold for highly compensated employees (HCE’s), who are exempt from overtime rules regardless of their job duties, based on their salary. The HCE threshold will go from the current $100,000 to $134,004 a year.

A possible delay?

Employers may have heard that these rules would be delayed by legislative action. While the US House of Representatives has taken steps to delay the implementation of these rules, any delay must be approved by the Obama administration, and thus far it seems extremely unlikey that the administration will allow any delay or change. The other movement to stop, or at the very least delay, implementation is a legal challenge lead by 21 state governors. Many legal experts see their case as being a long-shot, but are nonetheless seeking an injunction to delay the rule before December 1.

Employers should not be counting on these efforts, and should be prepared to comply with the new rules on December 1, 2016.

Overtime Rule Explanation

What do employers need to do to get ready for the change?

If an employer currently has employees who qualify as exempt from overtime but make less than $913 per week ($47,476 per year) they would be considered non-exempt going forward and would become eligible for overtime. The Department of Labor estimates that the rule will impact approximately 4.2 million people across the country, including over 275,000 in New York. 

HR One encourages employers to conduct an appropriate analysis of current payroll information and identify employees who will be impacted by the change. Once identified there are several steps one can take to determine how this proposed change could impact productivity and costs:

  • Can their work time be kept at or below 40 hours per week?
  • Would it save more over the long-term to increase certain employees’ salaries to $913 per week in order to maintain their exemption or to pay them time-and-a-half when they work more than 40 hours per week?

Contact HR One if you'd like one of our consultants to work with you to make these determinations and go through your options with you.