For loyal followers of these updates, this Department of Labor “update” may seem like déjà vu. Indeed, three years ago I sent out an update notifying you that the Department of Labor (DOL) had released final changes to the overtime regulations under the Fair Labor Standards Act (FLSA) and that the changes were scheduled to go into effect on December 1, 2016. Well, as it turned out, the new regulations never did go into effect, but the DOL recently decided to revisit the issue.
So what’s new?
In a nutshell, the proposed rule (which is expected to go into effect in January 2020) would require that all employees earning less than $35,308 per year (or $679/week) – regardless of their job duties – be paid overtime for working 40 hours in a work week. Overtime is typically equal to one and one-half times the employee’s regular rate of pay. This means that employees who are now exempt from receiving overtime will no longer remain exempt if they earn less than $35,308 per year.
Without sounding like the boy who cried wolf, now is the time for covered employers to start preparing.
What does this mean?
For exempt employees earning at least $679/week, nothing will change. However, employees who are now classified as exempt but who are earning less than $679/week will lose their exempt status if and when the new rule goes into effect.
Becoming non-exempt means that these employees will be eligible for overtime pay when working over 40 hours in a work week, and it also means that these employees will be required to record their hours worked. For exempt employees who never “punched a clock,” this may be demoralizing, although some may welcome the opportunity to earn overtime.
What should you do?
Step 1: EVALUATION
- Determine which employees will be impacted by these new rules if anyone.
- Assess the cost of reclassifying these employees as non-exempt or increasing their salaries in accordance with the new guidelines to keep these employees exempt.
- For employees who will be reclassified as non-exempt, no additional costs will result:
- if the newly non-exempt employees do not work overtime. Remember that even if you have a policy that requires all overtime hours be approved in advance, non-exempt employees who work over 40 hours a week must be paid at the time and one-half rate.
- if the hourly rate paid to the newly non-exempt employees is reduced to take into account the need for these employees to work some overtime hours each week.
- Remember to train all newly-exempt employees on your time-keeping procedures.
Employers impacted by these new rules may need to consider covering increased overtime costs by reducing benefits, but this will certainly result in a drop in employee morale.
Step 2: COMMUNICATION
- Notify impacted employees that changes are the result of new rules imposed by the DOL rather than a company decision
- Assure reclassified employees that the changes do reflect the employer’s opinion of their work or the employees’ value to the company
As always, you should contact legal counsel for any specific questions you may have about the applicability of the FLSA to your business, these new rules and how to best implement same.
Ellen M. Leibovitch
Board Certified Labor & Employment Lawyer
ASSOULINE & BERLOWE, P.A.
1801 N. Military Trail, Suite 160
Boca Raton, Florida 33431