NEW OVERTIME RULES: WILL YOU BE IN COMPLIANCE?

Over the past decade, HR professionals have scrambled to pull their organizations in line with confusing U.S. Department of Labor (DOL) rules that define which white-collar employees are eligible for overtime pay.

The DOL tried to “simplify” those landmark Fair Labor Standards Act (FLSA) regulations in 2004 to make it easier for employers to decide which employees are exempt (not eligible for overtime pay) and which are nonexempt (eligible for overtime).

But rather than calming the turbulent legal waters, those rules actually churned up more disputes and lawsuits. BusinessWeek reports that overtime lawsuits have “exploded nationwide.” In 2014, U.S. workers filed three times more FLSA lawsuits than they did 10 years ago.

What’s new? The DOL is proposing to change the lower-end salary limit at which employees are guaranteed overtime pay. Experts say more change will mean more confusion … and more employee lawsuits. Contact the GPBG offices for details about the DOL’s new overtime proposal. 

Advice: It’s cheaper to review compliance on your own before the DOL or a plaintiff’s attorney forces you to. The biggest FLSA mistake employers make is classifying nonexempt employees as exempt.

Here’s a reminder of the current rules:

✔ Salary threshold. Under current law, employees earning less than $23,660 annually (or $455 a week) automatically qualify for overtime pay. The DOL proposal to dramatically increase that salary floor could be finalized soon.

Current rules also create an exemption category for “highly compensated” employees. It says that almost all employees earning more than $100,000 a year are precluded from earning overtime.

✔ Duties test. Employees who meet the revised salary test must also meet the “duties test” to be considered exempt.

The FLSA provides an exemption from overtime pay for people employed as bona fide executive, administrative, professional and outside sales employees. Certain computer positions are also exempt. Contact the GPBG office for a detailed explanation of each of the five exemption categories.

Audit your compliance

1. Evaluate each job. Regularly evaluate each white-collar job to determine if it meets the new definition of “exempt employee.” If an employee’s status changes, reclassify that person as soon as possible. 

2. Check your state’s law. Several states, including California and Illinois, have their own employee classification rules that may contradict federal law.

3. Draft a “safe harbor” policy. The current rules create a defense for employers that make improper deductions from an exempt employee’s salary. To take advantage of this defense, adopt a policy that bans improper deductions. Find a model policy at www.dol.gov/whd/regs/compliance/fairpay/modelPolicy_PF.html