Federal Spotlight: New federal overtime rules expected in days

May 12, 2016

As anticipated, the new US Department of Labor (DOL) overtime rule changes are likely to be released within the next two weeks.   

The Fair Labor Standards Act (FLSA) requires time and a half pay for all hours worked in excess of 40 in a week for many of your employees.  Current exemptions to mandatory overtime pay include those in managerial, professional, and certain administrative roles, but only if the employee also earns at least $455 per week.  The proposed rule will increase that salary threshold to almost double the amount, expected to be $904/week.  As a result, it is estimated that more than 4.6 million employees nationwide who currently are not covered by the existing rule will be included in the update, which will carry a possible employer price-tag of $1.5 billion per year. In addition, the $904 threshold amount is expected to be indexed for annual increases.

When the final rule is issued, employers will have 60 days to comply. Many employers have already been planning a course of action, but those who have not given serious thought about this will need to address it fairly quickly. There are options, including simple compliance with newly eligible employees, increasing salaries for those who are currently exempt to the new threshold, limiting overtime work, reducing base salaries to offset the anticipated increase in overtime costs, or reducing staff to cut fringe benefit costs, to name a few. But ignoring the new change is not an option, and it is clear that it will increase labor costs for most businesses.

When the new threshold rules are issued, your human resources or managerial staff will need to get on top of this quickly to avoid costly noncompliance penalties.