Preparing for the USDOL's New Overtime Rule

Document created by 1002028 on Oct 23, 2015
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george pic for news.jpgCAI continues to receive questions about the US Department of Labor's (USDOL) proposed overtime rules that were published in the Federal Register on July 6, 2015 (Volume 80, number 128). The comment period ended September 4, 2015.  The main proposal, the one getting the most attention, calls for an increase to the minimum salary level for the executive, administrative and the professional exemptions from $455 per week to $970 per week (based upon the projected 40th percentile of first quarter 2016 weekly earnings for full-time salaried employees).  Although no one knows exactly when and if this will become a reality, our lobbyists in Washington believe it will probably not be out until mid-year 2016 at the earliest.

 

If this law is enacted as currently proposed, many employers will face some difficult choices.  On the one hand, if you simply raise the salaries of affected employees to the $970 per week threshold, besides the cost impact, that action may also create issues with employees in positions whose salary grade is the next level above.  In fact, this "compression" issue is a primary concern we're hearing from our members.  On the other hand, if you just convert all salaried employees paid below the threshold to non-exempt, then that can cause morale issues, it could reduce benefits for affected employees, and create a situation where people in the same job are classified differently, which while allowed by law is a bit unorthodox.  And once you convert employees to non-exempt you're then obligated to pay for things like travel, off-hours computer / cell use, and training, the value of which may in many cases raise their total pay to above $970 per week. 

 

Here are some of recommendations we've made and have gleaned from other professionals tracking this issue:

 

  • Identify those current exempt positions that would fall below the new threshold for exemption.  Calculate cost impact.
  • Review all exempt positions to ensure they meet the FLSA primary duties test.
  • Explore potential ways to reduce overtime for the newly reclassified exempt positions.
  • Draft a communications plan including both reclassified and non-impacted employees

 

Other employers have decided to delay any action until a final rule is announced.  We've created a quick poll to get a quick sense for what most employers are doing now to prepare.  Please answer this one question poll by clicking here.

 

If you would like to talk through your organizations options, need help charting a course, or just have questions please give me a call at (919) 713-5267 or message me at George Ports.

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