New DOL Rules on Overtime Go Into Effect December 2016
Recently, the Department of Labor released its new overtime rule which will take effect 12/1/16. The change was significant, increasing the new standard salary level to $47,476, and the new highly compensated employee level to $134,004. Businesses need to do a position by position impact analysis.
What Does This Mean?Regular employees earning under $47,476 are now eligible for overtime pay at time-and-a-half after 40 hours worked in a week. In order to maintain exemptions for employees, employers will need to increase salary levels to the threshold. If such an increase is unfeasible, then the employee will need to be reclassified as non-exempt and the employee will need to keep track or his or her time worked. Failure to comply will certainly result in litigation and adverse judgments.
What does this mean practically?Issues that arise include employee morale, workplace rules and a ripple-up effect. With respect to employee morale, employees who had previously been exempt may now be required to sign in and out, report hours and be held more accountable for their comings and goings. Where someone may have felt a certain level of prestige from being a manager, they may lose that feeling as their autonomy is curtailed. Workplace rules may also be affected as employers will need to look at their remote work policies to insure that all hours are being captured for non-exempt employees. As remote work is expected to grow more and more, this is an issue that will need attention at the outset. The ripple-up effect takes place when an employer elects to increase one employee's pay in order to meet the new threshold requirement and now is confronted with what to do with the salary levels of those who did not need to be changed. For example, if a company raises Employee #1 from $40,000 to $48,000 per year to keep from having to pay overtime, what does it do for Employee #2 who was already earning $48,000? Anything? Nothing? And what happens when Employee #2 learns of the unexpected salary increase of Employee #1?
So what should an employer do?A position-by-position analysis should take place in consultation with your attorney. The attorney can help explain the requirements for an exemption to be applied (upon meeting the salary threshold) under the various categories. In addition, the attorney can provide guidance aso to how to mitigate possible employee dissatisfaction over new workplace rules which may need to be implemented. An employer should also consider its IT system and what tools might need to be implemented in order to better track time to now meet the new overtime rules. If there is a portion of the workforce that routinely works on a remote basis, there are IT solutions that will help enable employers to meet audit requirements to prove accurate tracking of hours worked.
The bottom lineThe new rules are expected to change the status of more than 250,000 New York employees. Employers can anticipate an expected increase in payroll costs - either from raising salary levels or the cost of implementing new tracking requirements.