Proposed overtime regulations caused large-scale employer panic when introduced in 2016, only to be halted later that same year. Now, the United States Department of Labor (DOL) finally made the new rules available for comment. Here are three things you need to know:
- Know the Current Law. Under the current law, the default rule is to pay employees an hourly rate for the first 40 hours each week and 1.5 times that rate when they exceed 40 hours, i.e. “overtime.” However, employees can be “exempt” from the default rule if: (1) their job duties meet the statutory requirements for executive, administrative, professional, outside sales or computer employees; and (2) they are paid at least $23,600 per year ($455 per week).
- Know How the New Rules Up the Ante. The new rules raise the minimum to $35,308 per year (or $679 weekly). While lower than the $47,000 minimum proposed in 2016, it is still a substantial increase. Consequently, if an employee makes less than $35,308 per year ($679/week), he or she must be paid overtime when working more than 40 hours in a week.
- Have a Plan. Employers should identify the employees affected by the potential new rule change and address a series of questions, including:
- Do you want to reclassify the affected employees as “hourly”?
- Alternatively, do you want to increase the affected employees’ pay in line with the minimum salary threshold?
- If so, will other employees also expect and be given equitable raises?
- Alternatively, do you want to decrease the affected employees’ hours or lower base pay to account for the new overtime premiums to be paid going forward?
- Should you strictly limit employees to 40 hours a week?
These are just a few of the questions you should ask. Ultimately, though, you’ll want to be prepared to take action. Swift implementation now will avoid substantial fines and costly lawsuits in the future.