Plan Ahead for the Proposed Changes to Overtime Rules | DCR Workforce Blog

Plan Ahead for the Proposed Changes to Overtime Rules

Plan Ahead for the Proposed Changes to Overtime Rules

Non-payment of overtime pay is considered a major act of wage violations in America.

The proposal to review overtime pay enjoys a lot of support from labor unions and worker advocates, who see it as a necessary revision to reflect cost-of-living increases and stagnant wages. The business community, on the other hand, feels that it is needlessly expensive, and could potentially cost jobs and curtail career advancement. This rule is not just applicable to employers, but also staffing agencies which deploy independent contractors and contingent labor to client locations.

Companies have been waiting for information on the proposed changes to overtime pay for over six months now, with nothing much to hear. The Department of Labor has finally revealed that the final Overtime Regulations will not be released until late 2016, as the DOL is engaged in considering each of the nearly 300,000 public comments received in this regard! So the wait will have to continue until well past the April/May decision deadline promised at the outset.

If approved in full, the regulation would require the following:

  • Set the standard salary for exemption at the 40th percentile of weekly earnings for full-time workers, at $970 per week or $50,440 per annum.
  • Increase the total annual compensation requirement to exempt highly compensated workers to the annualized value of the 90th percentile of weekly earnings of salaries employees, working full time.
  • Establish a mechanism to automatically update the acceptable salary and compensation levels which decide whether a given worker is eligible for an exemption or not.

It is important to note that the rule, once announced, will become effective shortly thereafter, requiring employers to initiate their strategy for compliance with their requirements within a period of 30 to 60 days.

Some immediate steps that employers and staffing suppliers could take, to ensure compliance when required, would be to:

  • Audit the status of all current workers, keeping in mind that otherwise exempt executive, administrative or professional employees making less than the new minimum salary will automatically become “non-exempt” irrespective of their job titles and duties and be entitled to overtime for hours worked in excess of 40 hours in a workweek.
  • Increase record keeping requirements, and maintain accurate hours worked records on a daily and weekly basis.
  • Seek legal assistance from employment attorneys for positions requiring clarification.
  • Review work policies to ensure controls to verify that overtime work has been properly authorized, time is accurately reported, and protocols for addressing pay inaccuracies are clear.
  • Implement systems that automate work scheduling, worker classification, time reporting and approval, and payroll computation so as to eliminate errors and provide extensive reporting and auditing capabilities.
  • Make that critical business decision whether to pay the specified minimum salary or to pay overtime to workers, treating them as non-exempt requires prior planning and budgeting.
  • Maintain the current exemptions and pay the minimum salary to workers before the end of 2016 or early 2017, based on what is specified as minimum salary.
  • Plan to meet the additional workload by bringing in contingent labor to meet the additional workloads instead of expecting existing employees to put in overtime.
  • Avoid non-compliance with the requirements, as it could prove a lot more expensive if the Wage and Hour Division of the Department of Labor is invited to investigate any allegations of non-payment of overtime pay.
  • Decide who is exempt and who is not, and pay the non-exempt workers appropriately. Avoid calling them into the office over the weekend or issuing them smartphones, which record all activities and help to make a strong case for non-payment of overtime.

Reclassifying workers as non-exempt and having them track their working time could be seen by the workers as a demotion and create negative feelings. When revising an employee’s exempt status, companies may need to be addressed, to prevent any employee relationship issues. In all cases, employers would need to avoid practices like non-payment of overtime to their workers. They will also need to set up audit trails, using automated time and attendance processes if possible, which can protect them from any claims and penalties in future.

Do tell us about the plans you have made in this regard.

The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.
Lalita is a people/project manager with extensive experience in operations, HCM and training and development across industries like banking, education, business consulting, BPO and information technology. She believes in a dynamic approach to life and learning as change is the only constant.