This article was written by Powers attorney Ben Tesdahl

The Department of Labor has proposed new rules that, if adopted, would update the regulations to reflect new compensation requirements for employees who are exempt from overtime pay. The proposed rule increases the Fair Labor Standards Act (FLSA)’s regulatory salary threshold for overtime eligibility from about $35,000 to about $55,000. By doing so, the proposed new rules aim to expand the number of workers who are not exempt from overtime (so-called “non-exempt” employees). Organizations may want to be proactive and makes plans for how to adapt to the proposed regulations if they are enacted.

The following are steps that organizations may want to take to prepare for the possible approval of these new overtime regulations:

  •  Identify Impacted Employees. First and foremost, organizations should identify which employees are currently exempt from federal overtime regulations and have salaries under the proposed new threshold of $55,068 per year.
  •  Consider a Base Pay Adjustment. Of the affected employees identified above, organizations must decide whether to allow these workers to become non-exempt if the new rules go into effect or to preserve their exempt status via a pay raise. For example, if an employee makes just under the new threshold and works a significant amount of overtime hours, it may be most cost-effective to raise that employee’s salary to just above the minimum threshold to keep the person in an exempt status.
  • Implement Time Tracking and Training Soon.  For employees who are currently exempt but would become non-exempt if the new rules are adopted, organizations should begin to keep track of work hours to predict how much overtime may need to be paid. Organizations should prepare to implement changes in payroll and time tracking systems in order to ensure accurate overtime counting and payment.
  • Review Telework and Flex-time Policies.  Many employees who will become non-exempt under the proposed new overtime rules may currently conduct a significant amount of work at home or outside of regular business hours. In order to accurately compensate employees for overtime work and track overtime hours, employers should evaluate when employees may work remotely or outside of normal business hours and how these hours are to be tracked.
  • Evaluate the Method of Compensation.  Many organizations pay both their exempt and their non-exempt workers on a salary basis. However, there is a tendency for employers to lose track of hours worked by non-exempt employees who are paid on a salary basis, which can lead to violations of the FLSA by failing to pay overtime to such employees when they have worked more than 40 hours in a 7-day workweek. Some employers may find it easier to begin paying newly non-exempt workers on an hourly basis, since tracking working hours (and docking the pay for those non-exempt workers who arrive for work late) is more straightforward if the employee is paid on an hourly basis.
  • Calculate Potential Costs and Budget Impact. If the new regulations are adopted, organizations should examine the impact of changing salary levels and overtime payments on yearly budgets and update these budgets accordingly.

Disclaimer: The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Please contact your legal counsel for specific information. If you need assistance navigating workplace policies, contact Rob at Rob.Portman@PowersLaw.com or Ben at Ben.Tesdahl@PowersLaw.com.

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