News

Actions to Take Now for the New Overtime Rule

By: Mikkie Schiltz

The Department of Labor recently issued overtime rules this week. These rules present a major overhaul for the threshold of exempt employees: from $23,660 to $47,476. Employees who earn less than $47,476 are not exempt from overtime, and must be paid time and a half for all hours in excess of 40 hours per week. This change becomes effective December 1, 2016. Employers should consider whether to reclassify these positions. Positions unaffected by the change include outside sales, computer professionals, licensed professionals, and certain retail employees.

We want to provide you action steps for managing the change:

  1. Analyze and weigh costs.
    • This will entail discovering how many hours employees below the new threshold are currently working to decide whether to:
      1. Raise salaries above the threshold.
      2. Reclassify positions and lower hourly rates.
      3. Provide a bonus or commission structure.
  1. Communicate the change.
    • A raise in pay might seem like it only brings good news to employees, but you will need to consider how a reclassification might be perceived by employees used to being “salaried.” You will also want to plan how and when to communicate the information and how you will roll out any changes. Be sure to train the employees regarding overtime requirements, such as approval of overtime, tracking of hours, and recording and considering time worked remotely.
  2. Develop processes and plans.
    • With the salary threshold updated every three years under the new rule, human resource departments should develop a review and budgeting process to anticipate the wage growth projections.
  3. Review and audit positions.
    • With the change in threshold, it is a good time to audit all positions to determine whether employees/positions are correctly classified as exempt or non-exempt. Incorrect classifications can lead to underpayment and the need to pay employees back pay for overtime.
  4. Employees may need to begin recording hours.
    • All employees below the threshold or who are classified as non-exempt must record hours worked. This may require new timekeeping systems or new policies and procedures. Employers should consider:
      1. Policies regarding approval for overtime. Employees must be paid for all time worked, but employers may have a policy requiring approval for overtime, which could subject employees to discipline for failure to follow overtime approval processes.
      2. Policies regarding working remotely and recording of time worked, including time worked in responding to off-hours email or phone calls.

In order to fully prepare for the change, effective December 1 of this year, you may opt to work with your Employment Law attorney from Lane & Waterman who can help you to analyze, communicate, and develop your plan for this overtime rule change.

Mikkie Schiltz Employment AttorneyMikkie practices on our Employment Law team where she focuses on helping clients with employment and education issues including discrimination, harassment, and contractual obligations.