Employers Advised to Factor the New Overtime Rule into 2016 Expense Budget

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doug for news.jpgCAI had a record turnout last week at our Triad Employment Law Update in Greensboro.  The conference showcased lawyers from the firm of Constangy, Brooks, Smith and Prophete, LLP.  One major topic of discussion was the proposed overtime rules expected to take effect some time next year.  Most of the advice given mirrored what we've reported earlier in the CAI newsletter.  One new nugget to share: Employers need to determine their exposure for potential salary increases required under the new law and factor those increases into their budgeting process for 2016.


At present, the proposed law calls for an increase in the minimum salary level for the executive, administrative, and professional exemptions from $455 per week—$23,660 annually—to a salary not less than $970 a week annualized to $50,440.  The DOL received over 250,000 public comments on the proposed rule and so far has been silent about whether the final rule will stick with the $50,440 number.  Our lobbyists in Washington are advising we will see a number that is close to that level.  The lowest number we've heard so far is $44,000.  Either way, we are confident there will be a significant increase in the minimum salary threshold in 2016.  The timing of the new rule is anyone's guess.  We're hearing somewhere in the April to August time frame, but again no one knows for sure.


Either way, it's a safe bet to expect that for half of calendar year 2016 we will have a new law on the books, and if you have a lot of currently exempt employees who make below $50,440 a year, depending on what track you take, your expenses may be significantly impacted.  Let's review two of the most obvious options and the impacts to consider.


First, you decide to just raise all affected exempt employees to the new minimum salary threshold.  This approach has the obvious impact of increasing your salary budget. However, it also may put upward pressure on salaries in the next highest salary grade.  Employers should have that discussion now and adjust their budgets accordingly.


Second, you decide to just convert all affected employees to non-exempt.  On its face, this option sounds like the most budget-neutral approach, though it may result in more employee relations issues.  However, remember that once these employees become non-exempt, you're required to pay for overtime, training time, travel time, off-hours work, etc.  Depending on the position, all of these added payments could drastically increase an employees pay, and your budget.


There are a lot of things to consider.  You don't have to go it alone.  Reach out to our Advice & Resolution team for assistance in developing your organization's plan.


Related Articles:

New USDOL Overtime Rules Announced

Follow-Up to New USDOL Proposed Overtime Regulations

Preparing for the USDOL's New Overtime Rule

What are employers doing to prepare for the new USDOL Overtime Rules?

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