The Department of Labor`s New Overtime Regulation

May 20, 2016

The Department of Labor issued its long anticipated new rule on overtime that updates the regulations determining which white-collar, salaried employees are entitled to the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay protections. The rule increases the salary threshold below which most white-collar, salaried workers are entitled to overtime from the current $455 per week (or $23,660 for a full-year worker) to $913 per week (or $47,476 for a full-year worker).

The new rule has the potential to impact millions of workers who may either gain new overtime protections or get a raise to the new salary threshold. Under existing regulations, exempt workers are those who are paid on a salary basis, earn at least $455 per week, and are employed in certain common exemptions including an executive, administrative or professional capacity. This means that if you have an employee working as a manager in a fast-food outlet making $30,000 per year, the new regulation just granted the manager an increase to $47,476. This is not sustainable for many small businesses and there is presently Congressional Review that may address the agency’s action. Nevertheless, employers need to review their present employment and job classification practices to address the new overtime regulations. Some possible considerations include:

  1. Review and identify employees that may need to be reclassified.
  2. Review your present job descriptions and overtime payment policies.
  3. Prepare new methods of compensation plans for salaried employees affected by the Rule.
  4. Educate your staff on the new overtime regulations and possible reclassifications.
  5. Consider alternative payment and bonus alternatives.
  6. Communicate; talk with your employees about changes that may be necessary.