Final Overtime Rule Announced by the White House

CHALFONT, Pa. - May 19, 2016 - PRLog -- The White House announced new rules expected to extend overtime pay benefits to more than four million Americans.

In November of 2015, proposed revisions to the Fair Labor Standards Act (FLSA) through an initiative titled "A Fair Day's Pay for a Fair Day's Work (http://www.mccloskeypartners.com/assets/pdf/Overtime-Rules.pdf)" were discussed.   During the comment period between July and September of last year, the Department of Labor (DOL) logged more than 270,000 remarks from the public.

The rule announced on Wednesday, May 18 (https://www.dol.gov/whd/overtime/final2016/), 2016 raised the threshold for overtime pay for full-time salaried workers, and highly compensated employees (HCEs).  While the increases were not as high as expected, employers can now get down to the business of reviewing and revising salary, overtime, and benefits policies.

What employers need to know about the new overtime rule

For employers governed by Fair Labor Standards Act (FLSA), it is important to understand the new overtime rule and exemption language for white collar workers.

Straightforward changes created by the final overtime rule include the following:

·         Effective date of December 1, 2016:  The final overtime rule goes into full effect on December 1, 2016.

·         Increase in threshold salary level for full time, salaried workers:  The new rule increases the threshold for overtime pay for salaried, full-time workers from $23,600/annual ($11.35/hourly) to $47,476/annual ($22.83/hourly).  This is an increase from $455 to $913 per week.

·         Increase in the salary threshold level for HCEs:  Adjusted to represent the 90^th percentile of full-time, salaried workers, the new HCE bar is $134,004.  This represents an increase from the previous threshold of $100,000 per year.

·         Maintains adjustments to compensation and salary levels:  The new rule creates a mechanism for automatic compensation level adjustments to ensure alignment with current economic indicators.  These updates will occur every three years, with the first adjustments posted on August 1, 2019, and effective on January 1, 2020.

The overtime rule is aimed at workers who currently do not earn overtime for more than 40 hours worked per week, and earn below a certain salary figure.  While job titles are used by some employers to confer exempt status, it is important to remember exemptions follow duties (https://www.dol.gov/whd/overtime/final2016/SmallBusinessG...).

Salaried workers, regardless of job title, may be eligible for overtime based on their salary arrangement.  Tests established earlier for professional, administrative, and executive (EAP) exemptions remain the same.  That said, the new rule does not apply to teachers, lawyers, or doctors.

For many employers, challenges lie ahead in making adjustments to salary, job assignments, and overtime practices to become compliant by December 1, 2016.

Steps to move toward compliance with the new overtime rule

Announcement of the final overtime rule has been expected for some time.  With the final figures, employers now have the opportunity to rigorously review overtime and other policies and make needed changes.

If salary or overtime changes are required, the DOL suggests several options for employers to respond to the new rule, including:

·         Increase salaries of exempt employees:  If you currently have exempt employees close to the new salary threshold, who routinely work overtime, consider raising their salary to retain their exempt status.

  If you have employees that as of 12/1/2016 are classified as exempt that make less than $47,476, these employees will need to be reviewed and possibly reclassified as non-exempt/hourly to be in FLSA compliance.


·         Reconsider work assignments:  Revising schedules, revisiting workflow, and implementing improved project management are options for reducing overtime hours. By looking at pay, and hours spent, the DOL hopes for additional job creation from employers.  Spreading out hours could possibly create more work for part-time employees as well, and improve work-life (https://www.dol.gov/sites/default/files/overtime-overview...) balance.

These options are just some of the methods to implement the final overtime rule.  When you have questions about final rule, or duties tests, we offer responsive, proactive service and answers to help your business maintain compliance and workforce engagement.  Contact us (http://www.mccloskeypartners.com/contact-us.html) at McCloskey Partners, LLC today to discuss how these changes may affect how you classify your employees.  Office:  215-716-3035 x 2    Email: services@mccloskeypartners.com

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