By now you should be aware — and have prepared — for the Department of Labor’s change in overtime regulations (in effect Dec. 1, 2016), which doubles the exempt employee annual salary threshold from $23,660 to $47,476. But if you’ve been ignoring DOL’s repeated reminders, hoping the legislation would not be enacted or enforced, here is what you need to know: It’s time to implement changes.
Overtime law is mandated by the 1932 Fair Labor Standards Act, which requires companies to pay employees who work more than 40 hours a week overtime equal to one and half the normal rate of pay. In other words, if a $10/hour employee works 50 hours one week (defined as any seven consecutive work days), he or she must be paid $10/hour for the first 40 hours worked and $15/hour for the next 10. States may add other requirements on top of the federal directive. In California, for example, workers are paid overtime for hours worked daily over eight in any 24-hour period, and any seventh consecutive day worked, regardless of total weekly hours.
But to avoid overtime pay, many employers classify full-time workers as salaried employees and pay them just the required federal minimum. If they work extra hours, they get comp time to use the following week, but no overtime pay.
The new regulations doubles the minimum pay for full-time salaried employees from $23,660/year to $47,476/year. If that concerns you as an employer, then I suggest you stop reading now. That amount is scheduled to be increased again every three years, beginning January 1, 2020.
Faced with the December compliance deadline, businesses of all sizes rushed to make changes. Ignoring the changes is not an option. There are two ways employers can adapt:
Your company will have to implement a system to record hours worked and keep records to show compliance with the law. Recorded hours worked for overtime-exempt employees is clearly defined in the law, and one of the most common violations investigated by the Department of Labor.
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Before you take to the streets to protest the Fair Labor Standards Act, keep in mind the law also protects children from working during school hours and from doing dangerous jobs. The act also ensures equal pay for equal work for employees regardless of race or gender, and protects older workers from discrimination. In fact, President Franklin D. Roosevelt called the Fair Labor Standards Act the most important piece of legislation since the Social Security Act of 1935.
In business, as with all things, it’s better to light a candle than curse the darkness. Response and compliance to these changes, correct classification of employees, and implementation of technology to help manage and control labor costs will ensure your company’s sustainability and success for years to come.
The Fair Labor Standards Act
The act, issued by the Department of Labor, doubles the exempt employee annual salary threshold from $23,660 to $47,476. The DOL estimates the change (in effect Dec. 1, 2016) will impact 4.2 million workers.
What does it mean?
Salaried employees who earn less than $47,476 a year must be converted to nonexempt status and paid overtime wages. A salaried employee who works extra hours one week may make up for it by leaving work early the next week, but nonexempt employees who work more than 40 hours a week must be paid overtime.
Barry Rubin is president of the Gulfport Area Chamber of Commerce and principal of Time Systems in St. Petersburg. He can be reached at firstname.lastname@example.org.