For the past ten months, employers and HR professionals around the country have been hitting “refresh” on the Department of Labor’s website, anxious for news about overtime.
There was some anxiety in the business community when the Labor Department first proposed changes to the federal rules around overtime pay — specifically, who will be eligible to receive overtime wages when working more than 40 hours in a workweek. The proposed changes more than doubled the salary threshold above which many white collar workers are exempt from receiving overtime pay.
The Labor Department received more than 270,000 comments from businesses, organizations and advocacy groups on the proposed changes. Members of Congress weighed in. Employers wondered when the final version of the rule would be published, and what it would include.
On Wednesday, May 18, they got their answer.
What does the new rule include?
The big changes that will interest most employers and school districts are:
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- A higher salary threshold for overtime exemption. Under the old rules, an employee had to be paid a salary of at least $23,660 to be considered exempt. Under the new rule, that threshold has been raised to $47,476 (just slightly lower than the $50,440 level that was initially proposed).
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- Automatic updates to the salary threshold every three years. Before 2016, this figure hadn’t been changed in over a decade. Going forward, it will update every three years based on (ready for this?) the 40th percentile of earnings of full-time weekly salaried workers in the Census region where wages are lowest. Right now, that would be the South. The next time the threshold is updated in 2020, it’s projected to rise to over $51,000.
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- A higher salary level for “highly compensated employees” to be exempt. A relatively small number of white collar employees (working in an office or non-manual capacity) earn significant salaries yet do not meet all of the “Duties” requirements to qualify for the EAP exemption. To be considered exempt, those employees need to perform at least one (but not all) of the duties required for the EAP exemption and be paid $100,000 or more on a salary basis. The new rules raise that level to $134,004.
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- Implementation deadline: December 1. Prior to the final announcement, many expected a short timeline of 30-60 days before employers would need to comply with the new rules. They now have a little more room to breathe.
It’s time to get prepared
Employers now have some work to do: examining to see which employees are currently classified as exempt and non-exempt, who will become newly eligible to receive overtime when the new rules take effect, who will need to be reclassified and what is the best course of action to take.
But before taking drastic action, there are a number of potential pitfalls that districts will want to be aware of. Any decision you make — whether increasing salaries to avoid paying overtime, cutting services or putting curfews on work-related email and phone use — could have potential unseen complications or even put you in violation of the EEOC or FLSA.
Our white paper walks employers and school districts through the new overtime rules and possible action steps to take. Download it today.