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Are you ready for the new DOL overtime rule?

It's that time again. The U.S. Department of Labor (DOL) has enacted a new rule, and as a business owner you need to ensure that you will be in compliance come December 1. The New Overtime Rule may require some changes, but the DOL and other proponents of the new rule predict that the impact will likely be minimal.

As an employer, you do maintain a fair amount of flexibility in setting employee schedules and pay. However, you only have six months to make some important decisions about reclassifying employees and finalize the necessary changes before the final rule takes effect.

What does the new overtime rule do?

The biggest change in the regulation is an increase in the salary exemption threshold for overtime pay, which means that about 4.2 million more employees may qualify for overtime. Here's an overview of what this means:

  • The threshold will increase from the current $23,660 annual salary to a maximum of $47,476, for exempt executive and managerial positions.
  • The threshold will now be re-visited every three years and readjusted for wage growth.
  • The salary basis test will be amended, allowing employers to apply non-discretionary incentive payments, commissions and bonuses to satisfy up to 10 percent of the new salary threshold.

What are some available options for employers?

Do you currently have any staff members who meet the duties test as administrative, executive or professional employees? You will need to look at these workers and their function in the company to determine the best way to move forward. The following options may help.

  • If the employee's salary is already near the new threshold level and she typically works more than 40 hours per week, you may want to increase her salary to meet or exceed the threshold, thereby maintaining her exempt status.
  • Maintain your employee's current salary, but begin paying him for overtime when he puts in more than 40 hours. This is likely suitable when the worker usually works a 40-hour week and only puts in overtime during specific times of need.
  • Review your staffing needs and current white-collar employee levels to ensure your current employee pool meets workload requirements, and make any necessary changes.

Bear in mind that the new rules don't require you to change schedules or eliminate the ability of your employees to work flexible hours, nor must you use a specific method to track hours worked. However, you will be required to keep wage and hour records in compliance with the Fair Labor Standards Act. The impact this will have on employers through cost and time will likely vary.

Spending a little money now to proactively reduce your exposure to a wage-and-hour lawsuit is better than the alternative - paying to fight a lawsuit. The counsel of an seasoned employment law attorney who is knowledgeable in employer representation can offer valuable assistance in helping you comply with the new overtime rules.

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