New Federal Overtime Rules Released
Posted: May 26, 2016 in IHRSA
IHRSA Advocacy
BOSTON, MA – The U.S. Department of Labor (DOL) published new federal rules on overtime. The new rules, a response to President Obama’s directive to update regulations for the Fair Labor Standards Act, which were last updated in 2004, go into effect on December 1, 2016. The rules amend what is known as the White Collar Exemption for certain workers that have historically been excluded from overtime protections. These workers are described in the regulations as “Executive, Administrative, Professional, Outside Sales and Computer Employees.”
Implications of the New Federal Overtime Rules
Despite receiving written comments from tens of thousands of individuals and organizations stressing the serious harm that the changes would cause, the DOL made few changes to rules as originally proposed in 2015. The DOL did lower the salary threshold level to $47,476.00, slightly lower than what was originally proposed; however, this is still a 100% increase over the current salary threshold of $23,660.00. The changes are estimated to affect 4.2 million workers across all industries.
Beginning in December, for employees with a salary of less than $47,476 per year, or $913 per week, employers must compensate all time in excess of 40 hours/week at one-and-a-half times the regular pay rate. Employers may count incentive pay (e.g. commissions, company bonuses) towards the salary threshold, provided that the extra compensation is paid at least on a quarterly basis. However, employers are not permitted to count the extra pay past 10 percent of the salary floor. Hourly workers that do not receive an annualized salary are not affected; such exempt workers are already entitled to time and one half.
Advice for Health Club Owners
Kara M. Maciel an employment law attorney for Conn Maciel Carey, and a frequent speaker at the IHRSA convention, advised employers, “For those assistant managers and supervisors earning pay near the new threshold salary level, particularly those who generally work more than 40 hours per week, it may be a more financially feasible decision to raise their salary rather than try to address the issue of potential overtime pay.
“Alternatively, for those employees currently earning a wage closer to the prior threshold level of $23,660.00, reclassifying them as non-exempt and closely monitoring hours worked to keep them at or below 40 hours per week would likely be the more feasible option. But every workplace is different and the determination as to how to handle these new requirements must be made on a case by case basis.“
Most lawyers, accountants and other business advisors are noting that it is important that employers take steps now to achieve compliance for December. These steps may include:
- Reviewing and if needed, updating, employee classification—exempt or non-exempt;
- Setting up systems to log overtime for non-exempt workers.
The salary floor will be updated every three years, beginning January 1, 2020, with an agency announcement occurring 150 days before the new threshold goes into effect. The salary floor is set at the 40th percentile of data representing the earnings of full-time salaried workers in the lowest-wage census region (currently Southern states).
For more, read the updated Department of Labor regulation, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees.
If you have questions or comments, please send them to IHRSA’s public policy team at gr@ihrsa.org.
