In spite of an avalanche of comments to the Department of Labor’s (“DOL”) proposed new rules under the Fair Labor Standards Act regarding overtime (the “rules”), it now appears that the rules will become final in May and go into effect 60 days after their date of finality. PK Law briefly recaps the rules in this article and provides a few suggestions as to preparing for their implementation.
Under the overtime rules there are two classifications of employees: “standard” and “highly compensated” employees (“HCE”). To be exempt under the rules, a standard employee must be paid salary of $970 a week or $50,440 a year in 2016. An HCE must be paid salary of $2,349 a week or $122,148 annually in 2016. (Other definitional elements of such an employee may be found in the DOL’s Wage and Hour Division Fact Sheet #17H and the proposed rule does not affect those other definitional elements.) Such amounts may be adjusted annually under two methods in the rules, one of which may be maintaining the 40th and 90th percentiles, respectively, of the distribution of weekly earnings for all full-time salaried workers nationwide, the determinant of the foregoing numbers. (The DOL is also considering whether to allow nondiscretionary bonuses to satisfy some portion of the standard test salary requirement. Currently, such bonuses are only included in calculating total annual compensation under the HCE test.)
Employers ought to consider the following actions in preparing for the implementation of the rules:
1. Census. Review the salaries of employees taking into account the anticipated salary levels and determine those which are clearly unaffected and those which might be.
2. Compensation Increases. For those who may be marginally affected by the rules, consider increases in compensation to make those employees exempt rather than non-exempt.
3. Rework Compensation. Employees who may become nonexempt might have their compensation adjusted to take into account overtime pay. An employer ought to understand how current compensation is being paid to such employees on their current hourly basis.
4. Review Duties. Employers ought to review the duties of employees to determine whether they apply to standard employees or to HCEs and decide whether or not duties should be adjusted to fall within an exemption.
5. Look to Other Possibilities. Perhaps a retail sales or service industry exemption is available rather than the executive, administrative or professional under the rules.
6. Communication. Once an employer makes a decision on the approach to be taken under the rules, affected employees ought to be notified of that decision, preferably, where possible, in person. The intimacy of an individual meeting and the ability to ask questions privately should not be underestimated in its impact on morale and understanding in a particular situation.
The number of comments received by the DOL on the rules may affect their final form. At this time, questions do remain about the effect of comments on the rules.
PK Law’s Employment and Labor attorneys have extensive experience in the application and interpretation of wage and hour laws for employers. To contact an attorney in PK Law’s Worker Misclassification and Wage and Hour Law Group click here. For additional information contact firstname.lastname@example.org.
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