A significant update to employee overtime eligibility is on the horizon, with a new rule expected to be finalized in April. This change could soon affect your business operations.
The Department of Labor (DOL) plans to increase the exempt salary threshold from $35,568 to $55,068. Employers should take note that this increased amount is not yet set and may change before any final rule takes effect.
This adjustment means employees must earn at least this new threshold to qualify as exempt from overtime (OT) pay. The White House budget office’s recent review marks the final phase before public disclosure. Despite potential legal objections, relying on judicial intervention to prevent its enactment is unwise. Anticipated to impact 3.6 million workers, immediate preparation is crucial. Here’s what employers should do now.
Preparing for Potential New Federal Overtime Rules: 7 Essential Steps for Employers
1. Assess Pay Practices and Ensure Readiness for Compliance
The Fair Labor Standards Act (FLSA) mandates a 1.5 times the employee’s regular rate of pay as an overtime premium for hours worked beyond 40 weekly, barring exemption criteria such as a minimum weekly salary. The proposed DOL rule elevates the exemption threshold to $1,059 weekly ($55,068 annually), with plans for automatic adjustments every three years. Addressing these changes demands strategic planning, especially for currently exempt employees earning below the new threshold.
2. Navigate Your Decision Process
Identify exempt employees with salaries between $35,568 and $55,068. Decide whether to increase their salaries to meet the new threshold or reclassify them as non-exempt. Consulting legal counsel is essential when considering pay adjustments, calculating regular rates, managing incentives, tracking work hours, and evaluating benefits impacts. Preemptively monitoring work hours can also gauge the transition’s effects.
3. Gauge Morale Effects
Transitioning employees from exempt to non-exempt status may adversely affect morale. Many view exempt status as a mark of prestige and value the associated flexibility. Reclassification might be perceived as a downgrade.
4. Communicate Changes Proactively
Craft clear communications detailing compensation adjustments and new obligations like timekeeping. Providing advance notice will help manage expectations and maintain morale.
5. Initiate a Comprehensive Training Program
It’s essential to conduct thorough training for both managers and employees transitioning to non-exempt status before these changes come into effect. While the content of this training might vary across different organizations, it should encompass topics such as working hours, overtime authorization, timekeeping practices, and guidelines for breaks. This preparation is crucial for a smooth transition.
6. Confirm Compliance with the Duties Test
Besides meeting the revised salary criteria, it’s vital to ensure that exempt employees also fulfill specific job duties to qualify for their exemption status. This is an opportune moment to verify their roles truly match the necessary standards beyond just their titles or job descriptions.
7. Consider State-Specific Regulations
Be aware that state laws might impose more stringent requirements than those set by the FLSA. Some states have already established higher salary thresholds for exemptions. It’s critical to review and comply with these local regulations to avoid legal pitfalls.
Consider Working With A Skilled Consultant Specializing in Labor Law and HR Compliance
The shift in salary threshold demands a strategic approach to compliance, employee classification, and policy adjustments. My expertise in labor law and HR practices positions me as your ideal HR partner in this transition. I offer tailored consultation and solutions designed to ensure your business not only meets the new requirements but thrives.
Don’t let the evolving landscape of employment law catch you unprepared. Partner with me for guidance that is clear, direct, and focused on safeguarding your operations against potential pitfalls. I am ready to assist you in making informed decisions that align with both legal standards and your business goals.
Contact me to get started!
