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How Employers Can Prepare for New Overtime Regulations

/ September 20, 2019 September 20, 2019

The U.S. Department of Labor (DOL) is expected to set a new salary threshold soon for the white-collar exemptions to overtime pay under the Fair Labor Standards Act (FLSA). These changes aren’t final, but it’s expected the Trump Administration will pass them before the 2020 election.

The Obama Administration proposed to raise the threshold for these exemptions to overtime pay from $23,660 to about $47,500. The new rule was set to go into effect by the end of 2016 but was ultimately blocked in federal court. The Trump Administration’s new proposal would set the cutoff to $35,308.

How can employers prepare?

According to Caroline Brown, an attorney with Fisher Phillips, the first step is to assess employee job descriptions. She recommends evaluating anyone making up to $37,000 in case the final cutoff is adjusted.

Employers should note that under the proposed rule, nondiscretionary bonuses and incentive payments, including commissions, paid annually or more frequently may be used to satisfy up to 10 percent of the standard salary level, though the percentage could be adjusted under the final rule.

“Review your budgets, consider what positions you might restructure, flag whom you might reclassify to nonexempt or give a salary increase, and think about when, practically speaking, you should implement changes,” Brown said.

Along with salary, employees must also meet specific job duty requirements. The DOL has three different categories for white-collar exemptions:

  • Executive exemption: The employee’s main task is to manage the business, or a department or subdivision of the business. The employee must oversee at least two other workers and have the authority to hire and fire workers (or their suggestions on hiring, firing and changing the status of other employees is seriously considered).
  • Administrative exemption: The employee’s main responsibility is office or nonmanual work that directly impacts the business’ management or general operations. The employee’s work can be related to the business itself or its customers. The employee must have discretion when dealing with important situations.
  • Professional exemption: The employee’s main task is work that requires specialized knowledge in a science or learning field. The employee is essentially an expert in their field and has extensively studied the subject.

Employees whose jobs do not meet these criteria must be paid for working over 40 hours in one workweek and have their time recorded. Employers must create a plan for easily communicating and recording this information with employees, as well as making sure it meets government standards.

Most attorneys suggest there won’t be more than a few months between the approval announcement and the date to comply. Employers should consider beginning the review process in case the approval comes sooner than anticipated. For additional information about these changes and how they would affect your situation, please reach out to your Exude, Inc. Consultant.