What New OT Regulations Mean for Employers

The Department of Labor (DOL) announced an updated regulation that increases the salary threshold for paid overtime of employees from less than $455 per week to $913 per week. Before this recent change, salaried workers were only entitled to paid overtime if they made less than an annual salary of $23,660. Now, employees who earn yearly salaries of $47,476 or less will be entitled to paid overtime if they work more than 40 hours a week.

It’s estimated this change will make about 1/3 of salaried full-time employees eligible for overtime. That is a huge increase from the less than 10% that were previously eligible. This equals major changes for many businesses and will be especially true in Texas (and the south in general), where salaries are frequently lower than other parts of the country.

Similarly, it’s expected the change will have widespread impact across many industries and professions. Mashable recently shared an interesting graphic giving perspective as to who this increased salary threshold may benefit the most.

Employers have several ways to comply: (a) raise the workers’ salaries to make them exempt from the overtime threshold, (b) pay the required time-and-a-half overtime for those who do work more, or (c) make sure the employees aren’t working overtime.

Here are Four (4) things Employers should do now:

1. Identify Employees Who Need to be Reclassified.  For many Businesses, employees will need to be reclassified.  ID and classify all employees correctly, this is key.
2. Evaluate Salaries & Calculate Feasibility.  Doubling an employees salary just to comply with the new regulation may not be in the cards.  Could increased part-time workers be the answer?
3. Develop Administrative Controls to Ensure Compliance.  Evaluate handbooks, guidelines or other policy to see if revisions are needed.  Many contain provisions relating to pay that may be impacted by the changes.
4. Review Time-Keeping Methods.  Make sure timekeeping practices are sufficient for the new employees that will be required to use it.

The impact of the new OT regulations will play out over the coming months. Employers can and should be proactive in evaluating the impact of the overtime rules. Despite the changes, some employees may still be “exempt” from the overtime, timekeeping and other Fair Labor Standards Act (FLSA) requirements.