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IMA Executive News & Views Blog

New Overtime Rules Announced; Take Effect December 1, 2016

From IMA member Pautsch Spognardi & Baiocchi Legal Group, LLP

This past Wednesday, the DOL announced its new overtime rules, which will take effect on Dec. 1, 2016, giving employers six months to prepare for the change. The new rules raise the salary threshold from $23,660 to $47,476, or from $455 to $913 a week. This doubles the currently weekly salary threshold. The rules are estimated to make up to 4.2 million exempt employees eligible for overtime under the new rules. The rules also updated the salary threshold every three years, maintaining it at the 40th percentile of full-time salaried employees in the lowest-wage Census region, currently the South. The “highly compensated” threshold is raised from $100,000 to $134,004.

The Chicago Tribune reported on May 18th that businesses are “grappling” with the new rules. The Obama Labor Department touts purely positive effects from the new rules: employees will get either 1) a salary increase to stay exempt; 2) paid the overtime rate of time and one-half for hours worked after 40; or 3) be limited to a 40 hour work week and have more time away from work. But many employers believe that employees may be worse off economically, as a result of the reclassification of employees from exempt salary status to nonexempt hourly status, and limiting hours to 40 or less per week.

Employers need to sort through the issues to determine what approach works best for their organization. The questions that need to be asked are: 1) are employees properly classified as exempt or nonexempt under the rules?; 2) are currently exempt employees below the increased minimum salary threshold, and how should such employees be treated in the future?; 3) what will be the economic impact of treating previously exempt employees as nonexempt in the future?; 4) how will the employer keep track of the hours of previously exempt employees who are now treated as non-exempt?; and 5) how will the employer’s efforts to properly classify employees affect the organization’s manning and scheduling requirements?

All employers need to conduct an audit of their operations to determine what changes need to be made for compliance, as well as to correct any misclassification problems that exist now. Call any PSB attorney for an evaluation of your workplace, and options to comply with important wage & hour change.