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.
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:
- Increase their salary to at least $50,440 annually so that it meets the threshold.
- 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.