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Upcoming Changes to the Department of Labor’s Overtime Regulations

The Department of Labor (DOL) recently announced a proposal that will impact nearly five million white-collar workers who are currently exempt from overtime pay. If your business employs one or more of these workers who are exempt from overtime pay regardless of how many hours they work under the Fair Labor Standards Act (FLSA), this update could have a significant impact. The following serves as a heads-up to eliminate surprises in your future.

 

The Details

Information on the DOL’s website states the following: “On March 13, 2014, President Obama signed a Presidential Memorandum directing the Department to update the regulations defining which white collar workers are protected by the FLSA’s minimum wage and overtime standards. Consistent with the President’s goal of ensuring workers are paid for a fair day’s work, the memorandum instructed the Department to look for ways to modernize and simplify the regulations while ensuring that the FLSA’s intended overtime protections are fully implemented.”

 

The Purpose of These New Overtime Regulations

The proposed rule is meant to ensure that hardworking Americans who put in 40+ hours are paid fairly and able to make a decent living. It’s also designed to prevent employers from skimping on fair payment due to a technicality.

Since 2004, the white-collar overtime rules had a salary threshold of $23,660 annually or $455 per week. However, that salary is beneath the poverty line for a family of four. Under the old system, an employee could work 50, 60 or even more hours a week and still be below the poverty line if they have a family of four.

 

Increasing the Salary Threshold

The new rule would increase the salary threshold from $23,660 to $50,440 annually or from $455 to $970 per week. If you employ white-collar workers whose hours exceed 40 per week, they would need to earn at least $970 per week to be exempt from overtime pay.

 

When Will This Take Effect?

The new update will go into effect on December 1, 2016.

 

What Do I Need to Do?

If you employ one or more white-collar employees who are currently exempt from overtime pay, you have two options:

  1. Increase their salary to at least $50,440 annually so that it meets the threshold.
  2. Change their status to non-exempt, and pay overtime whenever they work more than 40 hours per week.

If you choose the latter, you’ll obviously need to track your employees’ hours if you’re not doing so already.

 

While these upcoming changes to overtime regulations won’t impact all small businesses, it can definitely throw a wrench in operations if you employ white-collar workers who happen to fall into this category. By preparing and familiarizing yourself with the changes, you can eliminate a lot of stress. Find more helpful information via these FAQs found on the DOL’s website.

overtime regulations

New Overtime Regulations

There could be significant changes on the horizon in terms of how much employers are required to pay employees for overtime hours. Following a memorandum on March 13, 2014, the Department of Labor (DOL) announced on July 6, 2015 that there is a proposal to change overtime regulations in an attempt to ensure that hardworking Americans get paid fairly. If this ruling does go into effect, it can have a considerable impact on both employees and employers. Here’s what you need to know.

 

Details of the Proposed Rule

The primary purpose of this proposal is to alter the original overtime policy that was set in place via the Fair Labor Standards Act (FLSA) in 1938. Under original regulations, eligible employees were guaranteed to receive time and a half for overtime hours. While this law was fairly effective in the past and covered the bulk of salaried workers, many people would make the argument that it’s outdated in 2015 and no longer effective.

Because the threshold for overtime pay is currently $23,660 a year or $455 a week and has been for several decades, it’s only applicable to 8 percent of workers. In the past, many workers earned $23,600 or less per year — but with inflation very few employees are eligible to receive overtime pay in 2015. However, with this new proposal, the threshold would change to $50,440 a year or $970 a week.

 

How it Affects Employees

There are two main ways that the new overtime regulation would affect employees. First, the number of workers who are eligible for overtime pay would increase dramatically. In fact, studies project that 40 percent (nearly five million Americans) would be eligible in 2016. Second, employees who consistently work overtime hours would earn considerably more than they have in the past. So by all accounts, this would be beneficial to hardworking Americans, and the core purpose of the proposal to protect workers from exploitation.

 

How it Impacts Employers

The implications for employers is simple — if you have employees consistently working overtime hours who earn less than $50,440 a year, then it’s going to take a chunk out of your profits. Or if you end up short-staffed and need certain employees to pick up the slack where they end up working over 40 hours per week, then it’s going to cost you. As a result, you may need to make adjustments to your scheduling structure or even consider bringing new employees on board to cover your business in case of a crisis.

On the other hand, if you rarely have employees working overtime hours, then this new rule will have little to no impact. Even with the higher exemption limit, it shouldn’t really cut into your profit margins. So at the end of the day, the impact of this proposal on your business really depends on how many overtime hours are worked during an average week.

While there are no guarantees that this proposal will come to fruition — and there will be no final ruling until one to three months after the DOL stopped taking comments on September 4, 2015, the general consensus is that it will go into effect. For that reason, it’s smart to prepare your business ahead of time and familiarize yourself with the details surrounding this rule, which you can find here.

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