Proposed Overtime Regulations
Newly Proposed Overtime Regulations: What to Know and How to Plan
In March 2014, President Obama instructed the Department of Labor to revise overtime regulations that will adhere to the Fair Labor Standards Act’s (FLSA) overall purpose. The Department of Labor (DOL) has not yet released the regulations, but we are aware of the expected changes and want to inform you of their implications.
A Brief description of the types of employees currently exempt under the FLSA.
• Executive Exemption – employees manage companies or departments, supervise the work of two or more employees and possess hiring/firing authority.
• Administrative Exemption – employees perform non-manual or office work directly related to a company’s management or operations and make decisions without immediate supervision from a manager. Jobs under this exemption include executive assistants, quality control managers, etc.
• Professional Exemption – employees include “learned professionals” such as certified public accountants, registered nurses, doctors, lawyers, etc. as well as “creative professionals” like actors, composers, screenplay writers, etc.
What are the proposed changes we can expect to see very soon from the DOL?
1. These regulations are expected to enlarge the number of employees eligible for overtime as the administration and the DOL desire to increase workers’ wages;
2. These regulations will increase (possibly double) the current minimum weekly salary of $455 up to $900 for all exempt employees; and
3. These regulations will impose a “bright line test,” or duties test, which will require all exempt employees to now prove that 50% of their work duties satisfy their particular exemption requirement.
What do the above-referenced proposed changes mean for employees and employers?
Catherine Gray, J.D. of Business and Legal Resources, Inc. reports in “New Overtime Regulations Proposed: Prepare to Comply” that these changes will affect “food service, hospitality, retail office services, call centers and other industries relying on lower paid supervisors and staff” the most.
Obviously, this means companies will be forced to pay out more labor expenses for the same productivity level. In order to maintain the same level of profitability, businesses will need to evaluate other ways to creatively cut expenses.
Some employers may be forced to reduce other components of total cash compensation, including bonuses, and benefits such as 401(k) contributions, vacations, sick days, etc. in order to offset inevitable increases in wages and overtime costs. At the same time, employees who become nonexempt under the newly proposed regulations may see their overall hourly wage decreased.
As these proposed regulations are put forth, what are the next suggested steps?
• Read and review the new regulations;
• Work with your management team on the new regulations and study the potential impacts they will have on your individual organizations;
• Develop a plan of action to implement these new regulations. Your action plan might include identifying which exempt jobs might be considered nonexempt under the new rules, updating your company’s job descriptions, and determining what kind of financial impact your organization will face.
• If you are concerned that your organization has wage and overtime issues, be proactive and take steps to correct them seeking outside advice and counsel if necessary.
Once the regulations are released by the DOL, you have 30 to 60 days to make comments (either in favor or against) on the newly proposed rules. Within three months after the comment period is closed, the official regulations will be issued.
We understand that these new regulations have the potential to financially impact your organization in many ways. Please do not hesitate to contact us with your questions and concerns.