The long-awaited final rule making millions more employees eligible to earn overtime pay is likely to be released on May 18, and if its contents match recent reports, employers and employees alike are in for big changes.
The Politico news organization reports that Vice President Joe Biden, Labor Secretary Tom Perez, and Ohio Senator Sherrod Brown will announce the rule at an event in Columbus, Ohio, on May 18. The report says the rule places the minimum salary for an employee to maintain exempt status at $47,500, up from the current rule’s floor of $455 a week ($23,660 a year).
Politico also reports that the duties test will not change in the new rule. The U.S. Department of Labor (DOL) had solicited comments on possibly changing the rule on what kind of work should be considered exempt from the overtime requirement in the Fair Labor Standards Act (FLSA), but the proposed rule made no change to the duties test.
Under the FLSA, employers are not required to pay exempt employees overtime even when they work more than 40 hours in a workweek, but certain criteria must be met for an employee to qualify as exempt from the law. Besides meeting the salary test, exempt employees must meet the duties test necessary for exempt status. Exempt employees must perform executive, administrative, professional, or computer tasks as their “primary duty.”
The process of coming up with the new final rule goes back more than two years and began with President Barack Obama instructing the DOL to update the FLSA exemptions related to overtime. That process culminated in a proposed rule, published in the Federal Register on July 6, 2015, that more than doubled the amount “white collar”—exempt—workers need to earn to qualify for exempt status.
The proposed rule called for raising the minimum exempt salary to the 40th percentile of earnings for full-time salaried U.S. workers. That would put the new salary floor at approximately $970 a week ($50,440 a year). The proposed rule also provided for automatic updates to the salary threshold based on that 40th percentile of earnings level. The current rule provides no mechanism for automatic updates, and the current $455-a-week level was last updated in 2004, and it won’t be known until the final rule is released whether it provides for automatic updates.
What employers should do
Once the new rule takes effect, employers will have to determine which workers will be exempt and which ones will need to be moved to nonexempt status. That determination will require a number of decisions, according to Burton J. Fishman, senior counsel with Fortney & Scott, LLC, in Washington, D.C. Employers will need to ask themselves if they want the rule change to be “compensation-neutral” and, if so, how they will achieve that. They also will have to consider which employees may need to be “bumped” up to stay exempt. Employers also will need to think about compensation compression and how work flow and work assignments will be affected. They also will have to train managers about authorizing overtime and will need to train formerly exempt workers about tracking time.
Al Vreeland, an attorney with Lehr Middlebrooks Vreeland & Thompson, P.C., in Birmingham, Alabama, also says training will be a major concern. Formerly exempt employees will have to be trained not only on the importance of timekeeping but also on the dangers of working off the clock.
“Managers won’t be able to ask employees work-related questions or make small requests during a newly nonexempt employee’s unpaid meal break,” Vreeland says. Plus, employees responding to e-mails after hours will need to report that time as work time.
“Hard-working employees who used to burn the midnight oil to get the job done will now need to [be] careful about racking up overtime,” Vreeland says. “And managers who used to expect those employees to burn the midnight oil will need to manage overtime—and make sure those employees aren’t doing the same thing off the clock out of dedication to their job.”
To learn more about the implications of the DOL’s final overtime exemption rule, join us for the live expert-led webinar “DOL Overtime Exemption Rule Is Final: Key Compliance Deadlines, Impact on Duties Tests, and Immediate Action Items” May 26 or June 2. During this event, you will learn how to get your policies and practices in order by the final rule’s effective date. Your specific questions will be answered by our in-house editors and Washington insiders from the law firm of Fortney & Scott, LLC. To register, visit http://store.blr.com/dol-ot-exemption-rule.