After months of speculation, the U.S. Department of Labor (DOL) advanced its final draft of new requirements for overtime pay exemption rules to the Office of Management and Budget (OMB) on March 14, 2016.
This step marks the final stage before implementation as OMB completes its review and releases the new regulations. The OMB’s review phase may take up to 90 days, but approval may occur sooner. While it is difficult to pinpoint a timetable, experts are forecasting the release for June or July 2016 and implementation on or about September 2016.
So what should employers do now? First and foremost, begin planning. Taking a wait-and-see approach may be appealing, but there are strategic planning steps which should be taken now:
Step 1: Understand the proposed new rules:
• The standard salary test amount changes. To be exempt from overtime pay, qualifying employees must be paid at least $970 per week ($50,440 annually) under the new rules. The current minimum is $455/week ($23,600 annually).
• A provision would increase the salary test level on an annual basis. This represents an addition to current regulations and adds a formula by which the salary test will be increased each year, indexed to inflation.
• For highly paid employees, the total compensation threshold will increase from $100,000 to $122,128,and these levels would also be increased each year.
• Another change under consideration is the duties test, establishing a minimum amount of time an employee may perform exempt vs. non-exempt tasks and identifying a minimum amount of time for a duty to be considered a primary duty.. Although the proposed rule does not offer specific changes, there has been discussion about making this change in the new rules.
Step 2: Analyze your current positions and exempt classifications to:
• Identify positions and employees who may be reclassified from exempt to non-exempt.
• Evaluate the need and frequency of each position to work more than 40 hours per week.
• Redesign pay structures and determine new pay rates.
• Review other policies (including benefits, bonuses, schedules, overtime approval) and how they will apply to those who will be newly classified as non-exempt.
Step 3: Build a communication and training plan for:
• Newly classified non-exempt staff
• Supervisors and Managers
• Others within the organization
Step 4: Evaluate non-exempt status changes on an ongoing basis for:
• Potential impact on budgets in current and future years
• Potential impact on schedules and workload
• Potential impact on HR policies and practices
• Additional training required
For more, see the U.S. Department of Labor website’s Frequently Asked Questions about the Notice of Proposed Rulemaking for Overtime: http://www.dol.gov/whd/overtime/NPRM2015/faq.htm
Susan Price, Strategic Account Manager