Contractormag 3051 Capitol1
Contractormag 3051 Capitol1
Contractormag 3051 Capitol1
Contractormag 3051 Capitol1
Contractormag 3051 Capitol1

Update on Overtime Rule Changes

May 2, 2016
It is recommended that the following steps be implemented now to prepare for these changes: • Review your current salary-exempt incumbents; identify those who make less than $50,440 per year. • Request/require these positions to begin to maintain an accurate record of time, if not already, to determine actual hours worked.  • Over several weeks and months, determine whether or not these incumbents who make less than $50,440 per year work in excess of 40 hours per week.
Photo: iStock/ThinkStock

The Department of Labor (DOL) has proposed that the White Collar exemption salary threshold of $23,660 be increased to $50,440 per year. The latest development is that the DOL forwarded its final overtime rule with the proposed increase in the guaranteed salary basis to the Office of Management and Budget (OMB) and Office of Information and Regulatory Affairs (OIRA) for review on March 17, 2016.  

This completes the last mandatory step that the DOL has to take before issuing the final regulations. Based upon this action, it’s possible that the overtime rules could come sooner than the expected date of July/August of 2016, with a release in April or May followed by a 60 or 90-day implementation period. The final rule may also include changes to the "duties test" that define the types of positions that must be paid overtime.

It is recommended that the following steps be implemented now to prepare for these significant changes:

• Review your current salary-exempt incumbents and identify those who make less than $50,440 per year.

• Request/require these positions to begin to maintain an accurate record of time, if not already, to determine actual hours worked. Use a reason such as ACA compliance, benefits, or some other reason – do not reference DOL.

• Over several weeks and months, determine whether or not these incumbents who make less than $50,440 per year work in excess of 40 hours per week.

• If overtime is worked, determine if hours of work can be reduced to 40 or less so as to avoid an increase in the salary or transitioning the pay plan to a non-exempt plan with overtime.

• If, in fact, the position is required to work over 40 hours per week on a regular basis, then you will need to determine whether or not you wish to increase the salary in one fell swoop to the minimum requirement of $50,440 per year.

• If this increase is not practical, you will need to determine whether or not you wish to implement a non-exempt pay plan which includes an hourly rate with time and one-half (150%) over 40 hours per week or the Fluctuating Workweek Method of Payment which is a guaranteed salary pay plan with half-time (50%) for hours worked in excess of 40 hours per week.

The fluctuating workweek is a very viable pay plan for both employer and employee and will be the least disruptive to both parties. However, we strongly recommend that you contact SESCO before implementing such a program to not only ensure compliance to the DOL regulations, but also to ensure that it is properly implemented and communicated to staff so there is no confusion.

Contact SESCO to order SESCO’s Compliance Publication – "How to Comply with Wage and Hour Regulations" ($35.00 for retainer clients / $55.00 for non-retainer clients).  If you are not a SESCO retainer client, simply call or email us and we’ll discuss our monthly Service Agreement.

William E. Ford is the President and CEO of SESCO Management Consultants, a human resource consulting firm to valued clients, in all industries, throughout the country. SESCO provides results-oriented human resource consulting services and special “retainer” relationships that include a free “hotline” to discuss day-to-day employment issues such as policy development, employee challenges such as disciplinary actions, terminations, or workers’ compensation issues, compliance to federal and state employment regulations, and many other management and human resource matters. Please feel free to contact Ford by calling 423-764-4127 or e-mail [email protected] to discuss this special fee arrangement.

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