"Taking care of business and working overtime” – Bachman Turner Overdrive, Takin’ Care of Business
Like BTO, more employees may soon find themselves working overtime. Not necessarily more hours; just qualifying for overtime pay.
Generally speaking, all employees are entitled to minimum wage and overtime compensation unless they are exempt from those requirements. There are many different exemptions under the Fair Labor Standards Act (FLSA). However, those exemptions generally require the employee to earn $455 per week or $23,660 per year, in addition to other requirements such as the amount of independent judgment or discretion the employee must use to do the job. Under the new FLSA regulations, that salary threshold will increase to $970 per week or $50,440 per year. Additionally, the highly-compensated worker exemption salary threshold will also increase from $100,000 per year to $122,148.
Accordingly, many employees who previously qualified for an exemption and worked on a fixed salary (instead of an hourly rate) may soon find themselves clocking in and out. And receiving overtime for hours worked in excess of 40 each week. That’s a good thing for them. On the flip side, however, it may squeeze businesses by forcing them to either raise salaries or manage hours.
The new FLSA regulations have been in progress since the proposed rules were announced last summer. On March 14, the Department of Labor (DOL) sent its final rules to the White House’s Office of Management and Budget (OMB) for final review. The OMB has up to 120 days to review the regulations before they become effective. The DOL’s Solicitor of Labor Patricia Smith has advised that the regulations will be published in July 2016 and take effect 60 days later.
Employers should analyze their workforce to determine how the final rules will impact them. For starters, employers should identify all exempt employees who earn less than $50,400 per year. After the new regulation takes effect, those employees will no longer be properly classified as exempt, meaning the employer has two choices: raise their salaries or implement procedures to ensure those employees are paid on an hourly basis and paid overtime if they work over 40 hours per week.