In 2014, President Obama directed the Secretary of Labor to update the overtime regulations to reflect the original intent of the Fair Labor Standards Act. As a result, the Department of Labor issued a final ruling which revised overtime pay regulations to increase the salary threshold for the overtime exemption from $455 a week ($23,600 annually) to $913 a week ($47,476 annually). Therefore, a salaried employee making less than $47,476 must be paid overtime for any hours worked in excess of 40 hours per week beginning on December 1, 2016. The changes can be attributed in part to the fact that a growing number of employees are working more hours and not being compensated for them.
Those who may be affected by the new regulations are salaried exempt employees making $47,476 per year or less. Small business owners should have a plan in place for each of these employees, as they may become eligible for overtime pay. Depending on their current salary, their role, the classification of their role, and the number of hours they work, each employee will have a different outcome. Business owners should start by creating a list of every exempt employee and their compensation to make the best decisions for their organization. Several options available include:
1) Pay time and a half for overtime work.
2) Raise workers' salaries above the $47,476 threshold.
3) Limit workers' hours to 40 per week.
4) Some combination of the above.
In order to prevent the salary level requirements from again becoming outdated and ineffective, the Department is establishing mechanisms for automatically updating the salary and compensation levels every three years to maintain them at the levels set in this rulemaking.
This ruling goes into effect on December 1, 2016. If you have questions or need help implementing a system for tracking overtime for your employees, I am available to help.