In May, the Obama administration announced new overtime requirements that may affect more than four million workers in the United States. According to the new U.S. Department of Labor (DOL) rules, which amend the Fair Labor Standards Act, salaried employees who are paid less than $47,476 per year must be paid overtime – even managers and others in supervisory roles.
Effective Dec. 1, 2016, the new threshold is roughly double the previous amount of $23,660 and may have broad implications for employers across a wide range of industries, including healthcare, advertising, media, manufacturing, hospitality and retail. Under the guidelines, employees making less than $47,476 per year–or $913 per week–must be paid overtime wages if they work more than 40 hours per week. In addition, the new rules:
- Set the minimum salary required to qualify for overtime exemption at the 40th percentile of weekly earnings for full-time salaried workers in the country’s lowest-wage census region (currently the South).
- Increase the total annual compensation requirement to exempt highly compensated employees (HCEs) from $100,000 to $134,004 (the annualized value of the 90th percentile of earnings of full-time, salaried workers nationally).
- Automatically update the minimum salary and compensation levels regarding exemption every three years, beginning Jan. 1, 2020. The DOL estimates the first update to the salary threshold will be $984 per week, or $51,168 annually.
- Allow – for the first time –nondiscretionary bonuses, incentives and commissions to count toward up to 10 percent of the required salary level. To qualify, employers must make these payments on a quarterly or more frequent basis.
In the coming months, employers can prepare for these changes by first analyzing their workforces and determining which employees may be affected by the new rules. In particular, employers should pay close attention to front-line managers, typically entry-level supervisory roles that often are paid around the new threshold and may periodically work extended hours. But that’s just one consideration. Among others, employers also can prepare for these changes by reviewing the following:
• Job descriptions: Each role at a company should have a detailed job description that outlines the duties, responsibilities and day-to-day expectations. In some cases, individuals with management titles may not, in fact, have any day-to-day supervisory duties.
• After-hours email: Under the new rules, checking email outside of regular business may count towards an employee’s 40-hour work week, particularly if the company issues mobile devices. Policies should be detailed and should spell out exactly what is expected of each employee.
Compliance with the new rules may not always be cut-and-dry, and the administrative burden on employers could be steep. The DOL estimates that direct administrative costs for employers to implement these new rules could amount to more than $250 million a year; in some cases, it may be less expensive to clarify job duties and put an entire workforce above the $47,476 threshold than deal with the ongoing compliance issues.
For more information on the DOL’s new rules, please contact IdilusHR