How the New Overtime Rules Could Impact Your Business
Recently, the U.S. Department of Labor (DOL) issued their Final Overtime Rule that will become effective on December 1, 2016.
Update on 11/23/2016: A Texas U.S. District Judge has recently issued a temporary injunction on the rule, which could delay or alter its implementation.
The DOL estimates that under the final rule, approximately 4.2 million more Americans will qualify for overtime pay. This number does not, however, consider whether or not employers to increase salaries of impacted employees to retain their exempt status.
Not only will millions of employees be impacted by the new rules, but the same will hold true for a large number of small businesses.
While there are many details to the Final Rule, here are three primary changes:
- The minimum salary threshold for the Executive, Administrative and Professional white collar exemptions will increase from $455 per week ($23,660 annually) to $913 per week ($47,476 annually) upon the effective date.
- These weekly salary levels will be adjusted every three years beginning January 1, 2020.
- Up to 10 percent of the salary threshold for Executive, Administrative and Professional white collar exemptions may be comprised of non-discretionary bonuses and other incentive pay where such payments are made at least quarterly.
In addition to the above, the U.S. Department of Labor is touting this change as one that will be a positive impact for workers as well as the economy in general. Consider the following DOL estimates:
- The changes will result in an extra $1.2 billion paid to workers every year.
- 56 percent of affected workers are women.
- 61 percent of affected workers are 35 years of age or older.
- 8.9 million salaried workers will be indirectly affected.
Are you wondering why the U.S. Department of Labor decided to make this change right now? The agency notes five distinct benefits of the final rule:
- More money for middle-class workers.
- Scheduled salary updates, providing predictability for employers.
- Improvement to work-life balance.
- Increased workplace productivity.
- Increased employment.
It took some time for the U.S. Department of Labor to release these revisions to the overtime rules. Now that the Final Rule has been released and the effective date has been set, employers can take the necessary to steps to comply with the overtime regulations and look to avoid the penalties and potential lawsuits that may result for non-compliance.