Labor Department Regulations to Expand Overtime Pay for Millions

Posted by Charles Middleton on 05/19/2016

Q: This week, the U.S. Department of Labor issued new wage and hour regulations that will significantly increase the number of workers who are eligible for overtime.  What types of employees will be affected by this change?

A: The new regulations, which go into effect Dec. 1, apply to employees who are currently classified as exempt under the Fair Labor Standards Act's (FLSA) executive, administrative and professional exemptions. As it stands now, employees who earn a minimum salary of $455 per week (or $23,660 annually) and whose positions satisfy a specific duties test qualify for the “white-collar exemption,” meaning they don't receive overtime. 


Q: What is most significant change?

A: Under the new regulations, an executive, administrative or professional employee must earn a salary of at least $913 per week, or $47,476 annually — more than double the current standard — in order to maintain the white-collar exemption. Employees who earn less than the new minimum threshold will be entitled to overtime pay when they work more than 40 hours in a workweek. Additionally, these minimum salary levels will be automatically adjusted every three years to track general wage increases around the country.  


Q: What impact will this have on employers?

A: Depending on the industry and the types and numbers of previously exempt workers employed, the change could have an enormous impact on a company's payroll.  Although the new regulations include a few other changes, including a new minimum salary threshold for highly compensated employees, this particular change is expected to impact the largest number of people. The DOL conservatively estimates that 4.2 million employees who are now exempt — including about 50,000 Oklahomans — will be entitled to overtime pay once the new rules go into effect later this year. 


Q: What should employers be doing now to prepare for the change?

A: The DOL has given employers a little over six months to familiarize themselves with the new regulations, closely monitor current staffing needs and work responsibilities, and implement staffing and scheduling changes as needed. The fact is that automatically increasing the salaries of previously exempt employees to the new threshold is not an option for most companies financially. Employers would be wise to begin the preparation process as early as possible by reviewing the current classifications of all employees, identifying which employees will be eligible for overtime beginning Dec. 1, getting a clear picture of the potential financial impact, and developing ways to control overtime. In addition, employers should review their current timekeeping systems to ensure they are accurate and effective and can be used by the new nonexempt employees beginning Dec. 1.


Q: What are the consequences of noncompliance?

A: It's important to note that these changes to the FLSA are binding law and not merely agency guidelines. Not only has the DOL ramped up its investigative and enforcement efforts in recent years, but also collective actions are on the rise as employees have become increasingly more educated about their rights under federal wage and hour law. Employers should take this opportunity to be proactive in reviewing all their compensation policies to avoid the liability associated with wage and hour violations.


Published The Oklahoman, May 19, 2016