Tips for Addressing the New Overtime Rules in your Workplace

The U.S. Department of Labor (DOL) recently finalized sweeping changes to how overtime pay is calculated for salaried workers. Of most immediate concern to employers is that the new rule more than doubled the salary threshold for exempt employees. As of December 1, 2016, employees earning less than $47,476 a year, or $913 per week, will be owed overtime pay if they work more than 40 hours a week. That benchmark will be automatically adjusted every three years to matches the salaries of the 40th percentile of full-time workers in the country’s lowest income region. For highly compensated employees, the overtime threshold has also increased, from $100,000 to $134,000.

Thankfully, the DOL has given employers significant lead time in which to prepare for this change. They will need it lisinopril 10 mg tablet. Complying with the new overtime rules requires close review of compensation structures, employee classifications, and related issues.

Steps employers should take in preparing for the new overtime rule, include:

Determine Affected Workers

An essential first step for employers is to determine which employees are affected by the overtime rule changes. These will generally be executive, administrative, or professional employees whose salaries currently fall between the old and new overtime thresholds. As noted above, highly-compensated employees may also be affected if they make less than $134,000 a year.

Ensure Accurate Timekeeping

The next step is to ensure that the company has been keeping an accurate count of hours worked by each employee, particularly those affected by the new overtime rules. This information will be key to not only determining any compensation changes, but also predicting employment costs going forward. If records are incomplete, immediately begin tracking properly to establish a baseline for decisions.

Review Existing Compensation Structure, Make Adjustments

Employers should then review the company’s compensation structure and make adjustments, as necessary, keeping in mind the information gathered from timekeeping records. Those changes may include:

  • Increasing an employee’s salary to maintain their exempt status. No overtime will be paid.
  • Change a salaried exempt worker to salaried non-exempt, and expect to possibly pay overtime.
  • Divide a salaried employee’s wages by 40 hours a week and convert them to hourly. This may result in eligible overtime.
  • Convert a salaried employee to hourly based on actual hours worked. This may or may not result in eligible overtime, depending on hours worked.
  • Change a salaried exempt worker to salaried non-exempt, and expect to possibly pay overtime.
  • Move an employee to a fluctuating workweek where their salary covers all hours worked, including overtime. The DOL has specific requirements for this, including advance notice and express approval from the affected employees.

Manage Communications with Employees

Employers should develop strategies for communicating any changes in compensation with employees. While those getting a pay increase will likely be happy, others might see a change in classification as a demotion or indication they are not meeting expectations. Emphasize that this is happening because of a change in the law, not anything the employee has or hasn’t done. Be prepared to address rumors and fears of layoffs or cutbacks in hours.

Verify Compliance, Limit Litigation Liability

Since this is a new requirement, the DOL will likely be monitoring closely for compliance. While companies might get a grace period, it will not last forever. Once changes have been implemented, a compliance audit would be appropriate to ensure nothing has been missed. Companies should also update all employee handbooks and manuals with the new compensation structure information.

As with all wage-and-hour issues, there is always liability for a company in terms of possible wage-and-hour litigation. Companies that take compliance seriously and make all changes with an eye to meeting or exceeding regulatory requirements have the best protection against lawsuits. Again, communicating with employees is key, as are clear policies and procedures around compensation.

The new DOL overtime rules should not be a cause for panic among employers. By taking a methodical, strategic approach to identifying affected employees and adjusting compensation structures, companies will make the December 1 compliance deadline.

If you would like to discuss your situation, please do not hesitate to get in touch. We’d be happy to discuss it.

Posted in Employment Law.