Plan Now for Changes to Overtime Rules

On May 18, the U.S. Department of Labor (DOL) issued a rule that would change overtime wage payment for American workers. The new rule allows more employees to qualify for overtime payment by doubling the salary threshold that employees must meet in order to qualify for an overtime wage payment exemption.

With the Dec. 1 compliance date quickly approaching, businesses have little time to evaluate employees’ exempt status, update overtime policies and make the appropriate payroll adjustments.

The House of Representatives passed the Regulatory Relief for Small Businesses, Schools, and Nonprofits Act (H.R. 6094), which would delay the implementation of the new rule until June 1, 2017; however, businesses are encouraged to address the changes right now. There is no guarantee that the delay would pass the Senate or that it would survive a presidential veto.

The bill’s key highlights:

• The salary threshold increases from $23,660 per year ($455 per week) to $47,476 per year ($913 per week).
• The minimum annual compensation salary level for exempt highly compensated employees will be increased from $100,000 to $134,004.
• The minimum salary level requirements for the white collar exemptions will be updated on an ongoing basis.  Automatic updates will occur every three years, effective on the first of the year.  The first automatic update will become effective on January 1, 2020.
• For administrative, executive and professional employees, employers may count up to 10 percent of employee nondiscretionary bonuses, incentive payments, and commissions as part of the standard salary level.
• Employers are allowed to make one catch-up payment at the end of each quarter to satisfy the standard salary level. Payments must be made within one pay period after the quarter.

While the potential for the 2016 elections to affect some portions of the overtime changes, businesses are encouraged to prepare now. Willful violation penalties include potential fines of $10,000 if convicted criminally and $1,100 civil penalties of $1,100 per violation.

Assess your level of risk by identifying which changes must be made and how the new rule will impact your business.