Tag Archives: new overtime rule

Trick or Treat! DOL Treats Employers with the promise of a new Overtime Rule

On October 30, 2017, the US Department of Labor announced that it will soon “undertake new rulemaking with regard to overtime.”   This announcement comes after the public comment period on the DOL’s Request for Information (RFI) regarding the Overtime Final Rule (where the DOL was seeking public input on what changes should be made to the overtime rule) closed.

In addition to this announcement, the Department of Justice, on behalf of the Department of Labor, filed a notice to appeal the Court’s ruling on the motion for summary judgment challenging the Overtime Rule.  In this ruling (which was issued on August 31, 2017), the Court held that the Overtime Rule’s salary level exceeded the DOL’s authority, and concluded that the Final Rule is invalid.  The DOJ does not, however, intend to proceed with this appeal until the DOL determines what the new exempt salary level should be.

At this time, the DOL has not released any further information regarding the release of a New Overtime Rule.  However based on previous comments made by Secretary Acosta, it is expected the new salary level will be in the low $30,000 range.

The next step in the rulemaking process will be for the DOL to issue a proposed rule.  Once that proposed rule is published, there will be a public comment period followed by the issuance of a final rule.

It is recommended that all employers keep on the lookout for this new rule.  In addition, we will continue to report developments here.

It’s the Final Countdown!

The effective date of the Department of Labor’s new overtime rule is under 100 days away. Has your company decided its course of action?

Under the new overtime regulations, which go into effect on December 1st, the minimum salary requirements for exempt status under the FLSA will be changing to the following:

  • The minimum salary threshold for the FLSA overtime exemption is increasing from $23,660 per year to $47,476 per year (or $913 per week);
  • The total annual compensation requirement for highly compensated employees is increasing to $134,004 annually

For employers in states (like California and New York, to name a few) where the state minimum salary requirement was higher than the old FLSA minimum salary threshold, their current exempt employees will be required to meet the higher FLSA salary requirements in order to keep their exempt status.

It’s not too late to take action to comply with the new regulations. All employers should analyze the current salaries of their exempt workforce and identify those exempt employees who make less than $913 per week in salary. Once the affected employees have been identified, employers should determine the projected cost of maintaining the exemption as opposed to reclassifying the employee to nonexempt.

With the cost analysis completed, employers can determine the course of action that best fits the needs of the company. A company can take one of four potential actions:

  1. Increase the employee’s salary. Employers can increase the employee’s salary to meet the $913 per week salary threshold. Assuming that the employee in question also meets the duties test (which was unchanged), the employee will then remain exempt from overtime.
  2. Reclassify the employee and pay overtime. Employers can reclassify affected employees to nonexempt and pay overtime in accordance with state and federal law.
  3. Reclassify the employee and prohibit employee from working overtime. Employers can reclassify affected employees to nonexempt and prohibit the employees from working unauthorized overtime. If this course of action is taken, employers will be required to monitor time worked by these employees to verify that they do not work overtime. Be aware, though, that any time the employee does work overtime, the employer will be required to pay the overtime rate in accordance with state and federal law.
  4. Reclassify the employee and adjust the hourly rate of pay to avoid increased costs. Employers can reclassify affected employees to nonexempt and adjust (likely reduce) the hourly rate of pay so that the employee’s annual earnings (hourly plus overtime) remain the same). The potential downside to this course of action is that the employee will likely be unhappy with receiving a lower rate of pay.

Regardless of the course of action chosen by the employer, the employer should implement the change before the December 1, 2016 deadline.

Available guidance materials

the Department of Labor has released the following guidance materials:

In addition, the White House has released the following guidance:

Clarifying “Incentive Payments” Under the New FLSA Regulations

The new FLSA regulations went into effect on May 18, 2016. (see our previous article on the new regulations “It’s Here … The DOL’s New Overtime Rule is (Finally) Published”)

The new regulations increased the minimum salary threshold for the FLSA overtime exemption from $23,660 per year to $47,476 per year (or $913 per week).

Also, under the new regulations, employers will be permitted to use an employee’s non-discretionary bonuses and “incentive payments” (including commissions) to satisfy up to 10% of the new standard salary level — subject to certain restrictions.

While the term “incentive payment” is not defined in the new regulations, there are certain aspects of compensation that are clearly not considered “incentive pay”. Those items are those which the US Department of Labor has historically not allowed to be included in the calculation of the minimum salary amount, namely:

  • The value of medical, disability or life insurance or contributions to retirement plans or other fringe benefits, or
  • The value of board and lodging paid by an employer.

When determining whether an exempt employee’s salary is in compliance with the new overtime rules, employers may not consider the value of incidental benefits provided to the employee by the employer.

How Will You Respond To The Department Of Labor’s New Overtime Rule?

With the new Department of Labor rule finally released, employers nationwide are asking, “What should I do next?”

By December 1, 2016 the new salary threshold for exempt employee status will be $913 per week ($47,476 per year). Employers know that they have to make some changes to comply with the new salary requirements, but figuring out the best course of action can be a daunting task – especially for employers with a large workforce.

We recommend that all employers analyze the current salaries of their exempt workforce and first determine which employees are affected by the change. In other words, identify those exempt employees who make less than $913 per week in salary.

Once the affected employees have been identified, employers should determine the projected cost of maintaining the exemption as opposed to reclassifying the employee to nonexempt. Performing this analysis will help employers make an informed decision of the course of action to take.

With the cost analysis completed, employers can determine the course of action that best fits the needs of the company. A company can take one of four potential actions:

  1. Increase the employee’s salary. Employers can increase the employee’s salary to meet the $913 per week salary threshold. Assuming that the employee in question also meets the duties test (which was unchanged), the employee will then remain exempt from overtime.
  2. Reclassify the employee and pay overtime. Employers can reclassify affected employees to nonexempt and pay overtime in accordance with state and federal law.
  3. Reclassify the employee and prohibit employee from working overtime. Employers can reclassify affected employees to nonexempt and prohibit the employees from working unauthorized overtime. If this course of action is taken, employers will be required to monitor time worked by these employees to verify that they do not work overtime. Be aware, though, that any time the employee does work overtime, the employer will be required to pay the overtime rate in accordance with state and federal law.
  4. Reclassify the employee and adjust the hourly rate of pay to avoid increased costs. Employers can reclassify affected employees to nonexempt and adjust (likely reduce) the hourly rate of pay so that the employee’s annual earnings (hourly plus overtime) remain the same). The potential downside to this course of action is that the employee will likely be unhappy with receiving a lower rate of pay.

Regardless of the course of action chosen by the employer, employers need to start the analysis and determine a course of action as soon as possible. This will enable the employer to implement the change before the December 1, 2016 deadline.

It’s Here … The DOL’s New Overtime Rule is (Finally) Published

The days of speculation regarding the changes to the salary requirements for the FLSA overtime exemption have (finally) come to an end.

The US Department of Labor has released its new overtime regulations, resulting in the following changes:

  • The minimum salary threshold for the FLSA overtime exemption is increasing from $23,660 per year to $47,476 per year (or $913 per week);
  • Employers will be permitted to use an employee’s nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the new standard salary level — subject to the following guidelines:
    • nondiscretionary bonuses and incentive payments must be paid on a quarterly or more frequent basis and
    • the employer may make a “catch-up” payment on the first payday following the close of the quarter, if the nondiscretionary bonus/incentive payment falls short of the salary level;
  • The total annual compensation requirement for highly compensated employees is increasing to $134,004 annually; and
  • The salary threshold will be updated once every three years

The new rule goes into effect December 1, 2016.  It is strongly recommended that employers start thinking about how this change impacts their current exempt workforce as soon as possible.

The new rule is over 500 pages long, so to help employers digest these regulations, the Department of Labor has released the following guidance materials:

In addition, the White House has released the following guidance:

DOL Pushes Up Anticipated Release Date of New Overtime Rule

In a previous blog entry (DOL Announces Intended Release Date For New Overtime Rule), we reported that the US Department of Labor (“DOL”) had announced it intended to release its new overtime rule in July of 2016.

However, in a mid-December 2015 interview, Secretary of Labor Thomas Perez stated he was “confident” the final rule would be “out by the spring of next year.” This is obviously several months earlier than the previously-stated July 2016 anticipated release date and also contradicts a statement made by the Solicitor of Labor M. Patricia Smith at the American Bar Association’s Labor and Employment Law conference in Philadelphia, where she stated that she did not expect the new rule to be released until “late 2016.”

We will continue to watch for the final release of the new overtime rule and will post the final rule once it is released. In the meantime, employers should take steps to prepare for the change by doing the following:

  1. Identify all exempt employees and determine if their current salary is above the proposed new minimum salary requirement. If their salary is not, determine whether you wish to increase salary levels of the affected employees or change these employees to non-exempt status (i.e. make them hourly and begin paying overtime);
  2. For those employees who are converted to non-exempt:
    1. Verify these employees are completing time cards and, if applicable under state law, receiving required rest periods and/or meal periods;
    2. Verify these employees are not performing any off-the-clock work and, to the extent off-the-clock work is performed, these employees are properly reporting the off-the-clock work;
    3. Verify these employees are properly reporting and receiving payment for all travel time.