Everything started with Elizabeth Paredes and her letter to the President of the United States. Mother of a three-year-old, and an assistant manager at a sandwich shop, Elizabeth earned approximately $2,000 a month for work that exceeded 50 hours or more per week. As a manager, she did not merit a dime of overtime pay. She told the President that the work she does requires a lot of time away from her son, and not having it compensated makes it seem not worth the trouble!
Inquiry was made and the quantum of litigation on the issue was assessed. It was found that only 7% of all full-time workers were at all eligible for overtime, based on their income. The Department of Labor (DOL) was given the mandate to study the existing overtime protections and propose their replacement.
The new rules took two years to be prepared, but once finalized for implementation beginning on December 1, 2016, they will extend overtime protections to 4.2 million Americans, whose hard work was going uncompensated. It will net $12 billion in overtime wages to workers in the next 10 years, or give them some free time to go home to their families or get the required training to build new skills. The quantum of minimum salary requirement will be upgraded annually while the compensation will get updated automatically, every three years – unlike the previous update in 2004 which remained unchanged for more than a decade.
To implement the new rule, employers have just a little more than 120 days in which to evaluate their workforce structure and transition them to a feasible and effective arrangement that ensures their compliance with the new Fair Labor Standards Act (FLSA) overtime regulations.
Employers need to exercise enormous care in calculating new hourly and overtime rates, as well as in determining whether total compensation will meet or exceed the threshold salary level. Either way, they must be prepared to ante up! They must also account for any and all hours worked over 40 in a work week, and when paying newly non-exempt employees at their overtime rate.
Should the DOL follow up these new regulations with increased oversight and enforcement once it’s implemented, the number of litigations over the issue of overtime may increase significantly, especially as the awareness for these regulations will also be high. As most overtime litigation is brought as a class action suit, employers stand to face significant financial burden in the form of legal costs and penalties over any act of violation, whether deliberate or not.
Does your VMS help you stay compliant with FLSA overtime rules and other government mandates? If not, you may want to see how Smart Track can help you stay compliant and avoid such risks.
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