After two years of diligent work and negotiations, the Department of Labor recently announced its final rule to adjust overtime rules. Championed by President Obama, the revised rules are projected to impact four million Americans. The significant changes are intended to provide a “meaningful boost to many workers’ wallets, and will go a long way toward realizing President Obama’s commitment to ensuring every worker is compensated fairly for their hard work,” according to the Department of Labor.
The revised rules will become effective on December 1, 2016 – giving employers less than five months to make any necessary adjustments to comply with the amended regulations.
The final rule will raise the salary threshold indicating eligibility for overtime pay from $455/week to $913/week ($47,476 per year). This will apply to salaried employees who primarily perform executive, administrative, or professional duties, as is outlined in the Department’s regulations. The salary threshold will be automatically updated every three years.
Meaningful boost to many workers’ wallets, and will go a long way toward realizing President Obama’s commitment to ensuring every worker is compensated fairly for their hard work…
To put the modified rules in perspective, under the previous rules, if a salaried manager at a retail store makes $600 a week, he would not qualify for time and half overtime if he exceeded 40 hours a week. However, under the revised rules, the same manager would qualify for overtime compensation if he exceeded 40 hours a week because his $600/week salary is below the $913/week threshold indicating exemption from overtime pay.
These significant changes will force many employers across different sectors to be creative in making necessary adjustments to comply with the revised rules. Amongst the various options that employers have will be to raise the salary of their affected employees above the $913/week to fall within the overtime exemption or convert their employees to hourly employees and pay them overtime.
Employers have less than five months to prepare. It is advisable for affected employers to consult with legal counsel to develop a better understanding of the regulatory changes and create a course of action to ensure timely compliance.