In May of this year, the U.S. Department of Labor announced the final rule updating the current overtime regulations, extending overtime pay protection to more than 4 million workers.
The rule more than doubles the threshold at which executive, administrative, and professional employees are exempt from overtime pay, increasing it to $47,476 annually from the current $23,660 established in 2004. The threshold will increase automatically every three years starting on January 1, 2020.
Employers were given 190 days to comply (the deadline for implementation is December 1st), yet many business groups are arguing that it’s just not enough time. While no one appears to disagree that the rule is a necessity, considering it hadn’t been updated in more than a decade, many claim it’s too much, too soon.
Officials from 21 states filed a lawsuit early in September challenging the rule. Attorney Generals from Texas and Nevada spearheaded the lawsuit, joined by Michigan, Wisconsin, Ohio, and others. Hours later, the U.S. Chamber of Commerce and other business groups filed a separate challenge to the rule in the same federal Texas court.
Both lawsuits claim the department abused its authority by increasing the threshold so drastically, and failed to take in account the regional variations in the cost of living. Supporters of the lawsuit fear the new rule will ultimately result in budget cuts and layoffs as businesses scramble to prepare for the December 1st deadline.
Speaking of the deadline, there is another battle underway. The National Federation of Independent Businesses (NFIB) is asking the DOL to delay it until June 1st. This would give small businesses more time to reorganize their work forces and implement new systems for tracking hours, record keeping, and reporting.
In addition, NFIB officials are supporting a bill that would phase in the new salary threshold gradually over a three year period.
When it comes to the deadline delay, it seems the NFIB may get their wish. On September 28th the U.S. House of Representatives voted 256-to-177 to pass HR 6094, the Regulatory Relief for Small Businesses, Schools, and Nonprofits Act, which would extend the date of implementation by an additional six months.
The U.S. Senate is working to pass the rule in the upcoming “lame duck” session of Congress, before President Obama leaves office.
What the DOL Overtime Ruling Means for Business Owners
These recent events should not give you, as a business owner, a false sense of security. Whether or not the rule is amended or delayed, the time to prepare is now. The DOL has issued three options to consider:
- Raise workers’ salaries above the new threshold. If you have an employee whose salary is close to the new threshold level, you may consider giving them a pay increase in order to maintain their exempt status.
- Pay time-and-a-half for overtime work. For those newly overtime-eligible employees who typically work 40 hours or fewer a week, but have occasional overtime spikes, you may consider paying them time-and-a-half whenever they work more than a 40 hour week.
- Limit workers’ hours to 40 per week. Reevaluate hours and workload to ensure that no white-collar workers who earn below the salary threshold work more than 40 hours a week.
If you don’t have a system in place to track your employee’s hours, it’s time to do your research. A Human Capital Management (HCM) System like Balance Point’s state-of-the art HRIS not only tracks hours, but can alert you when your employees are approaching overtime prior to it actually occurring.
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