The U.S. Department of Labor Proposed Changes
to the Overtime Regulations
Good News/Bad News
On June 30, 2015, the Wage and Hour Division of the U.S. Department
of Labor used its rule making authority to propose changes to the
existing overtime regulations that President Obama announced would
make "up to five million more people eligible to receive overtime
pay from their employers." The Department is proposing to
update the regulations governing which executive, administrative,
and professional employees (white collar workers) are entitled
to the Fair Labor Standards Act’s minimum wage and overtime
Key Provisions of the Proposed Rule
The Notice of Proposed Rulemaking (NPRM) focuses primarily on updating
the salary and compensation levels needed for white collar workers
to be exempt. Specifically, the Department proposes to:
the standard salary level at the 40th percentile of weekly earnings
for full-time salaried workers ($970 per week, or $50,440 annually
in 2016). The present required weekly salary is $455.00/week
- increase the total annual compensation requirement
needed to exempt highly compensated employees (HCEs) to the annualized
value of the 90th percentile of weekly earnings of full-time
salaried workers ($122,148 annually); and
- establish a mechanism for annually
automatically updating the salary and compensation levels going
forward to ensure that they will continue to provide a useful
and effective test for exemption.
What this means for employers is that
if you have an employee who is presently classified as Salaried/Exempt
who is making less than $50,440 (as of 2016 when these rules go
into effect), that employee must be reclassified to hourly and
must be paid overtime for all hours worked over 40 within one week.
When the proposed rules were initially published in June of this
year, it was expected that they would become effective in early
2016. On November 5, 2015, the Solicitor of Labor, Patricia Smith,
announced that the Department of Labor (DOL) had pushed the effective
date to late 2016. That is the GOOD NEWS. Normally when these types
of rule changes occur employers are given a 120 day implementation
period. However, in this case, they may be given as few as 30 days
to implement the final rule and convert those presently exempt
employees who will not meet the new salary thresholds to non-exempt/hourly
employees. That is the BAD NEWS.
The reason for the short implementation period is because if the
next President is Republican, then he/she could invalidate the
new rule all together. The DOL needs employers to convert all employees
who need to be converted before the next Presidential election.
If anyone should have any questions concerning these proposed
new rules, please do not hesitate to contact us.
In order to protect
themselves and their organizations, employers should be aware of
and in compliance with these and other regulations/decisions issued
by various federal/state agencies and courts. If Paul Hilton, Human
Resources Consulting, LLC can be of any assistance with these or
other HR related issues, please do not hesitate to contact us.
Paul Hilton Human Resources Consulting works with our clients to insure that all required documentation is correct and sufficient to successfully defend against a claim to any unemployment compensation commission.
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