1 in 5 Business Owners Unaware of DOL's Proposed Overtime Rule

  • Posted by: J. Kent Gervasini |
  • 5/3/16 |
  • 3:01 PM
1 in 5 Business Owners Unaware of DOL's Proposed Overtime Rule

The U.S. Department of Labor (DOL) is expected to finalize its proposed overtime rule in the coming months and experts now predict that final rules will be published sometime between late April and early July, with an effective date 30 to 90 days thereafter.

1 in 5 Business Owners Unaware of the DOL's Proposed OT Rule

The U.S. Department of Labor (DOL) is expected to finalize its proposed overtime rule in the coming months, and it is expected to have a significant impact on businesses. According to Paycheck, Inc., a leading provider of solutions for payroll, 1 in 5 business owners claim they are unaware of the rule altogether.

On March 14, the U.S. Department of Labor sent its proposed Fair Labor Standards Act overtime rules to the U.S. Office of Management and Budget for review. OMB review is the last step before final rules are published and implemented. The proposed rule, which received more than 200,000 comments during an active public comment period, will expand the number of employees who are eligible to receive overtime pay, or time and one-half their regular rate of pay for hours worked over 40 hours in a workweek.Therefore, business owners should consider implementing now in order to prepare for the final rule.

OT Rule Proposed More Than Doubles Current Exempt Threshold

Federal overtime rules require that employers pay eligible "Non-Exempt" employees at least 1.5 times their regular rate of pay when they work more than 40 hours in a workweek. The rule could potentially expand the number of employees eligible for overtime protection from about 8 percent of the salaried workforce to 40 percent, where employers chose not to increase existing salaries, according to The Washington Post. Read more about federal overtime rules on the U.S. Department of Labor website.

Proposed OT Rule More Than Doubles Current Exempt Threshold
Under The Fair Labor Standards Act
Current Threshold Proposed Threshold
Hourly $11.375 Hourly $24.23
Weekly $455.00 Weekly $970.00
Annual $23,660 Annual $50,400


Potential Implications of the Rule Are Expected to be Far Reaching

⇒⇒Employers Will Feel Financial Impact

Under the overtime pay rule soon to be finalized, employers will certainly feel the financial impact of the rule that will raise the weekly threshold (more than doubled) for white-collar workers. This means that employees who meet the duties tests under the professional, executive, or administrative exemptions, but do not earn the new requisite salary will need to be reclassified from exempt to nonexempt and entitled to overtime pay.

Regardless of industry or sector, some companies will have many front, mid-line and general managers, administrative and business operations staff who earn more than $24,000 a year but less than $50,000 face the largest cost increases in payroll due to the proposed new rule, experts say. This is a difficult and complex road as employee reclassification, reduction in staff or salary, new timesheet requirements, etc. will affect moral and turnover rates. If the rules goes into effect as some experts now predict, companies will be forced to make some strategic changes to reduce the burden of higher salary thresholds if the overtime rules do indeed take effect as currently proposed.

Considerations for Addressing Potential Overtime Rule Impact

⇒⇒Reclassification, Salaries, Bonuses, Benefits, Employee Moral etc.

If you are in business today, it is your responsibility to stay up-to-date on the ever-changing regulatory environment.This is certainly a challenge for business owners and non-compliance can lead to costly financial penalities. Therefore, working with a trusted advisor is a must. Accordingly, companies should consider how they will address the final rules and their effects. Such considerations might include:

  1. Identifying all potentially affected employees and determining how many hours they currently work per week
  2. Determining whether to continue to pay affected employees on a salaried basis and raise their salary to comply with the new rules or convert them to hourly employees and be subject to paying overtime
  3. Tracking newly nonexempt employees’ work hours, including work before or after regular hours, on weekends, and conducted from home
  4. Determining whether to adjust employee wages, commissions, bonuses, and benefits—and whether, for perceived equity or other reasons, to also adjust others’ compensation and benefits
  5. Assessing work performed on a day-to-day basis by affected employees and whether their duties can or should be modified; determining whether to limit their work hours to less than 40 per week and, if so, assessing how to make sure their work gets done (e.g., by hiring additional employees)
  6. Deciding, if employees are reclassified as nonexempt, the extent to which overtime costs might be passed along to clients
  7. Determining how the decision to reclassify affected employees will be communicated to employees
  8. Determining how to address morale and other nonmonetary effects of reclassifying employees who consider themselves to be management-level workers
  9. Analyzing and correcting current FLSA misclassificaitons (exempt or non-exempt)

The information above does not constitute legal advice.

Employers and corporate entities should consult a Colorado labor or employment attorney with additional questions, or for guidance and more information.# # #

Source: americanstaffing.net, paycheck.com, washingtonpost.com

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