You may remember that last year it was announced that there was going to be a change to the overtime exemptions for white collar workers. Ten months have passed since the proposed rule change was announced and yet nothing has changed leaving many business owners are wondering what is going on.
The new rule would require that these employees who make under $50,440 annually to be paid overtime for any hours worked over 40 in a week, even if they are considered an executive, administrative or professional level employee under the Fair Labor Standards Act.
Under current regulations, certain salaried employees can be exempt from overtime if they meet certain requirements: (1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed; (2) the amount of salary paid must meet a minimum specified amount; and (3) the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by the regulations.
The second requirement, the minimum amount an employee must be paid, is the portion of the rule that is set to be changed. Currently the minimum is $455 per week (equal to $23,660 per year) and would be raised to $921 per week (equal to $50,440 per year). This presents a challenge, particularly for small businesses that typically have strict compensation budgets.
Here is a timeline of events along with the latest update:
- The Department of Labor released news on June 30, 2015 of a change coming to the minimum salary required for executive, administrative, and professional employees (typically white collar employees) to be considered exempt from overtime.
- In mid-November 2015, it was announced that the change to the overtime rules would likely not take place until mid to late 2016, leading many to believe that a change could come in July of 2016 or even later.
- Before the end of November 2015, the Department of Labor released their 2015 fall regulatory agenda, which set a July 2016 target date for the final rule on the overtime change.
- New information came out in February of 2016 stating that a final rule would likely come before May 16, 2016 due to the election year. A report released by the Congressional Research Service, urged agencies to complete any final rules that they did not want to be subject to the mercy of the next Congress and next President.
At this point, the timing of implementation is still not clear. What is clear is that companies, particularly small businesses with strict compensation budgets should audit the compensation and other polices for their exempt employees that would be affected by the rule change and make some decisions about what will be done once the rule is passed. It is not only about the compensation itself, but also time tracking, time off and many other polices that often differ for exempt employees. It si possible that the window for compliance will be 30 to 60 days which is not much time for organizations with a lot of affected employees.
If you would like help auditing your employees and preparing for compliance should the new rule be enforced, you can contact an HR Business Partner for assistance.