On May 18, 2016, the United States Department of Labor (“DOL”) released its much-anticipated changes to the overtime exemptions under the Fair Labor Standards Act. The final rule, which becomes effective on December 1, 2016, will impact many Idaho employers. It increases the salary basis test for exemptions including the executive, administrative and professional (“White Collar”) exemptions from $23,660 to $47,476 per year, more than twice the current annual level, meaning that more employees will be eligible to receive overtime pay for working more than forty hours a week and that it will be more difficult for employees to meet exemptions from the overtime requirements. The final rule also increases the total annual compensation requirement to exempt highly compensated employees from $100,000 to $134,004 annually. Employers have six months to implement these changes in their workplace.
This change means that all employees who make less than the $47,476 threshold must be paid time and a half for any hours worked beyond the 40-hour work week. Therefore, employers may need to reclassify exempt employees to nonexempt, which includes tracking hours worked. For White Collar employees whose earnings are close to the new threshold, employers may either increase salaries so their earnings are above the threshold or reclassify these employees to nonexempt.
Employers will also need to:
- Consider budgetary impacts. Determine how your organization will cover costs based on possible responses. Your bottom line will be impacted by either having to raise an impacted employees’ pay to meet the new threshold level or by having to pay overtime to newly-classified non-exempt employees.
- Watch out for time-keeping requirements. If reclassification is needed, administrative adjustments may be necessary to payroll or other HRIS systems to track employee’s hours worked and to pay overtime wages to ensure compliance.
- Update policies and educate managers. Employers should update their policies, if necessary, and use this change as an opportunity to ensure that supervisors/managers understand how overtime and “off the clock work” are handled by the organization. This may also be a good time to review duties performed by your employees, to ensure that they meet the duties test of the exemptions, as well as the salary basis test.
Additional information can be found on the Department of Labor website. https://www.dol.gov/featured/overtime