Plan Now for New Department of Labor Overtime Exemption Changes

You’ll probably remember that the Department of Labor (DOL) has been considering rule changes to overtime compensation. Well, the changes have finally been announced, and though they won’t take effect until the first or second quarter of 2016, it’s worth familiarizing yourself with them now, because at least one of them is going to be big.

Under the current rule, an employee classed as executive, administrative, professional, or computer is exempt from overtime if the employee receives a salary of at least $455 per week ($23,660 annually). The new rule would more than double this amount, to $921 per week ($47,892 annually).

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The DOL announcement and a link to the proposed rule can be found here.

With several months at least until the changes take effect, there are some basic steps that can be taken to prepare:

  1. Determine which employees fall into the four above employee classes. Generally speaking, this includes most employees who are currently paid a salary.
  2. For each employee who falls into those four classes, determine whether the employee’s salary will meet the threshold ($921 per week or $47,892 annually) under the new rule.
  3. For each exempt employee whose salary doesn’t meet or exceed the new threshold, you have two main options:
    • Option 1: Increase the employee’s salary to the new threshold to maintain the employee’s overtime exemption; or
    • Option 2: Keep the employee’s salary where it is, but reclassify the employee as non-exempt. Realize that you are now obligated to pay overtime for any hours worked in excess of 40 per week. Also, you will most likely need to track this employee’s hours more closely than you have in the past.

With those factors in mind, a cost/benefit analysis should show the most efficient way to classify exempt/non-exempt employees under the new rule.

Don’t wait until the rule takes effect; start planning now. Let us know if you have questions or if you need advice. And stay tuned. We’ll keep you informed as these changes go forward.

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