Work it Out Blog

Are You Ready for New Overtime Rules?

Jul 13, 2016 by Jill C. McQueen

When the U.S. Department of Labor announced its new final rule concerning overtime eligibility, it received a great deal of media attention, and for good reason.  The rule will increase the minimum salary level employees must earn to be considered ineligible for overtime premium pay for work in excess of 40 hours per week.  Currently, individuals who can meet the duties test for certain “white collar” jobs are exempt from the overtime pay requirement if they earn a salary of at least $23,660 a year.  In December, that threshold salary amount will rise to $47,476 annually or $913 per week.  More than 4 million employees currently classified as exempt are expected to be affected.

With the rule’s effective date of December 1, 2016, looming, employers and employees alike may be wondering what the change will mean for them.  Can all exempt employees currently earning less than $47,476 count on a raise this year?  Not necessarily.  Employers have a number of options for dealing with the coming changes.

  • For individuals who are already close to a salary of $47,476, it may make good sense to increase pay to the new threshold level and continue to classify the workers as exempt, particularly for jobs in which employees must work long hours and be available for duty outside their normal scheduled work hours.  It is possible—and permissible—for a group of workers in the same occupation to include exempt and non-exempt employees, based upon variations in their pay

Other options include:

  • Converting an exempt (overtime ineligible) employee to non-exempt (overtime eligible) status and paying an overtime premium for all hours over forty. An employer wishing to maintain an individual’s income level post-conversion will need to think carefully about calculating an hourly wage to achieve that result, taking into account whether the employee will continue to work more than 40 hours per week at a higher premium rate. 
  • Reducing or eliminating altogether work in excess of 40 hours per week in order to avoid the time-and-a-half overtime obligation. 

Whichever option or combination of options an employer utilizes, it is likely that greater care will be needed in the future to track and record employees’ working hours.

Here are a few features of the overtime rule that are often overlooked: Certain professionals, such as doctors, lawyers and bona fide teachers, are not subject to the salary level requirements that apply to other white-collar workers. The new rule will not affect outside sales employees.  The final rule does not change the hourly salary for individuals qualifying for the Computer Professional exemption, but the weekly standard salary amount has increased to at least $913 per week.

Finally, the DOL has announced a limited non-enforcement policy for providers of Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities with 15 or fewer beds.  For these providers, enforcement of the new rule will be delayed until March 17, 2019.

Day Ketterer's employment law attorneys can answer your questions about the new overtime rule. Contact us at 330.455.0173 or email info@dayketterer.com.

The content of this blog is for informational purposes only and is not intended as legal advice for any purpose. This blog is not intended to present an exhaustive summary of all applicable laws, or to take the place of legal advice.  If you have any questions regarding the law, please contact us for assistance.