It’s been almost 15 years since the last update to the minimum salary threshold. This threshold dictates whether an employee is exempt from being paid overtime under federal law. But the first week of March saw the Department of Labor’s (DOL) overtime threshold rule resurface in the public conscience.
The DOL recently submitted a new proposal that would increase the salary threshold below which workers would be entitled to overtime. This new rule would push the salary threshold to $35,308. That’s an increase from the current $23,660 and would make 1.3 million more Americans eligible for overtime pay.
In this article, we’ll detail the new DOL overtime rule and tell you how it’s different from previous plans. Then we’ll tell you what your company should do to prepare itself for the implementation of this potential rule.
What’s the DOL Overtime Rule?
As previously mentioned, the current salary threshold employees must make to be exempt from receiving time, and a half overtime pay is $23,660. The new rule would increase this threshold by over $11,000. While a boost from the current limit, the new law is significantly less than the $47,000 threshold proposed under the Obama administration.
Similarly, the new proposal differs from the previously proposed threshold by not making any changes to the duties test for exemption from the overtime rule. Also, unlike the previous proposal, the new requirement is based on an employee’s weekly guaranteed salary, not just an annual figure.
This new proposal is currently open to a 60-day comment period before finalization. If approved, it has been estimated the rule could take effect between the third and fourth quarters of 2019.
What Should You do to Prepare?
Like the last iteration of this proposed rule, employers should proactively prepare for the law’s implementation. There are several tips your company should take to prepare itself for the new DOL overtime rule for exempt employees.
1. Start Auditing Your Employees
The first step all employers need to take to prepare for the new overtime rule is to determine which employees wouldn’t be affected by the law. Exempt employees must both earn more than $35,308 and work in a specifically-defined executive, administrative, professional, computer, and outside sales roles.
You should go through every exempt employee’s salary and job duties and determine whether they should remain classified as exempt. The duties test is especially vital. There’s a chance employers have misclassified some current workers. These employees make a salary above the current threshold, but the day-to-day work they do doesn’t pass the duties test.
2. Determine How You’ll Handle Pay Increases
What will your company do with those employees who’re currently exempt from the overtime rule, but wouldn’t be under the new law? Your company will have to decide whether it wants to increase these employees’ base salary or pay them overtime.
It’s important to note the newly proposed rule would allow employers to count, “certain nondiscretionary bonuses and incentive payments,” as up to 10 percent of an employee’s salary when determining whether they’re exempt.
This rule is crucial because it counts payments made annually. Companies had to make these payments quarterly or more frequently to count toward the threshold, under the Obama administration’s rule.
If your company does decide to change its pay structure for employees, you should do so carefully. Have a discussion with in-house executives, accountants, and department heads in charge of budgets before you communicate any of these changes.
3. Make a Comment
As previously stated, the rule is now open for a 60-day comment period. It’s essential employers make their voices heard. Reach out and get involved in the public comment process. Whether you support or dislike the new rule, make sure you make contact and let the DOL know how you feel.
4. Train Employees
You should train managers to know what activities constitute work for their employees. Similarly, your leadership should know who will be exempt under the new rule and who wouldn’t. Plus, tell your staff who qualifies as an exempt individual and what duties qualify them for this exemption.
Finally, make sure your business has a plan to effectively communicate any news or changes related to the overtime rule. Make sure your company takes its time and selects the best communication methods for your employee population. For example, if your employees skew younger communications through video or games are more likely to be effective than a printed flyer.
Whether the DOL overtime rule is passed in its current form or altered down the road, your company needs to create a detailed plan for how it will comply with this rule. Don’t work overtime to figure out your company will deal with this overtime rule.