Overtime Changes Will Take Effect December 1, 2016

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Glenn Israel

Based upon the updated Department of Labor regulations that were released last month, the minimum annual salary for exempt employees will be $47,476 ($913 per week) as of December 1, 2015. This minimum annual salary for exempt employees will be subject to adjustment every three years to make it consistent with the 40th percentile of the earnings of full-time salaried workers in the lowest-wage census region, which is currently the South. Although the DOL did not make any changes to the “duties tests” for exempt employees, as they previously suggested they might, they have indicated that they will be paying close attention to the duties tests in future enforcement actions. For more information about new regulations visit the DOL website.

Why this Matters

The DOL has in the past reported that it finds some sort of wage and hour violation in 78% of the investigations it conducts. Many of those violations involved the misclassification of employees who should have received overtime as “exempt” employees and the resulting failure to pay those employees their overtime pay. The financial impact of such misclassifications on employers can be enormous. The new regulations will cause everyone, including your employees, to focus on the issue of overtime. It is expected that there will be an increase in the number of claims that are filed by disgruntled employees and the number of investigations that are launched by the DOL.

To Do List

If you have not done so already, you should immediately take these next steps:

Review all of your employee classifications

Determine what impact the new regulations may have on you

Develop a plan to minimize that impact

It also would be prudent to conduct a full audit of your employee classification system focusing on your exempt employees, your policies and practices for record keeping and overtime calculation for your non-exempt employees, and your use of independent contractors. We can assist you with that process.