The new overtime rule from the United States Department of Labor takes effect on December 1, 2016. This new rule will affect businesses of every size across the country. The new rule roughly doubles what minimum salaried employees can earn before they are classified as exempt from receiving overtime pay for working more than 40 hours a week. The previous threshold was $455 per week or $23,660 annually. Starting December 1, 2016, salaried employees who earn less than $913 per week or $47,476 a year, would be eligible to receive time-and-a-half overtime pay. The Department of Labor estimates that this will include about 193,000 newly eligible white-collar workers in Illinois. The salary threshold will continue to be reevaluated every three years.
What’s not changing? To be considered exempt or ineligible for overtime, workers’ jobs must pass both the salary threshold, as described above, as well as a test of their duties or job responsibilities. The “duties test” defines responsibilities that are exempt as executive, administrative, and professional employees, as well as, teachers, doctors, lawyers, and outside salespeople.
How you should prepare for the new requirements? While the new rule applies to all businesses, there is no one-size-fits all strategy for compliance. Businesses must create a strategy that maintains productivity, while keeping an eye on their bottom line. The Department of Labor offers the following suggestions:
- Pay time-and-a-half for overtime work;
- Raise workers’ salaries above the new threshold;
- Limit workers’ hours to 40 hours a week;
- Some combination of the above.
This also may be a good opportunity for businesses to reevaluate and align staff hours and workload.
Additionally, smallbusinesstrends.com offers the following checklist for preparing your business for the upcoming implementation of the new rule.
- Determine the final rule’s impact on your business by becoming familiar with the rule changes and how they affect your business.
- Conduct an audit of employeesto determine how many employees are likely to be affected.
- Track exempt employees’ time, including the time exempt employees spend working from home after hours, since it, too, would be compensable.
- Determine which employees will transition to non-exempt status.
- Develop a plan, reviewing various scenarios and determining the impact on your overall financial picture.
- Update timekeeping policies and ensure that the timekeeping method used is adequate to record time worked and overtime.
- Develop training procedures.
- Create a communication plan to share expectations with employees.
- Start preparing now.
By taking action now, employers will be prepared when the rule takes effect and every three years thereafter when the threshold is adjusted. The attorneys at Rock Fusco & Connelly can help your business navigate compliance and other legal issues that you may encounter with this new rule.