May 13

Federal Overtime lawsWe have blogged several times in recent months on the expected changes the United States Department of Labor (“DOL”) plans to implement concerning overtime coverage.  Based on early reports, the proposed rules and regulations may extend overtime pay to an additional 5 million employees.

As reported earlier, the DOL has announced its intent to essentially double the salary requirement for exempt employees in professional, executive, and administrative positions from $455 per week ($23,660 annually) to $970 per week ($50,440 annually).  The proposed rules also seek to increase the total annual compensation requirement needed to exempt “highly compensated employees” from $100,000 to $122,148.  Finally, the proposed rules seek to establish a mechanism for automatically updating the salary and compensation levels going forward.

The DOL’s final rule could be here in a matter of days or weeks, and employers may have only 60 days to prepare before they take effect.

The impact will be significant, in the following 3 ways:

1.       Reclassification of employees: We believe a majority of employers will be required to review employee classifications and make changes to account for the new rules. These changes could mean paying a higher salary to maintain the exemption or giving up the exemption altogether and paying overtime instead;

2.       Automatic salary increase:  The salary level may not only increase, but the final rule may contain an automatic annual increase based on the inflation rate; and

3.       Duties Test:  While no changes to the duties test have been proposed, it is not inconceivable that the DOL does so in the final rule.

While employers ultimately have to wait for the final rule, it would be prudent to begin reviewing the salary level and duties of exempt employees to determine how much of an impact these new rules will have on your business operations.  As stated above, you may have only 60 days to implement these changes, so the more you can do now to prepare, the better off you will be when the changes come.